Help with Analysis of 2 Investment Properties
Hello: I would appreciate anyone's input into my analysis of 2 multifamily apartment buildings I'm looking at. I'll use the asking price for the analysis, although I expect I'd offer less for each of them. Both are in same city, about 1 mile apart. Economy of city is decent but I would not expect much price appreciation in the 10 yrs I plan to own the buildings. I'm relying only on cash flow (not cap appreciation). I'd finance either with a 75% mortgage, 4.75%, balloon payment in 5 yrs, 20 yr amortization period. They are located in another city, so I'd hire a management firm for each. I grew up in the city where they are located so I know they are in stable neighborhoods (not declining but not improving either).
Prop #1: 10 units in 2 adjacent buildings.
Price: $280000
Down Payment $70,000 and Mortgage of $210,000
Annual Rental Income: $47,500
Annual Expenses (incl taxes, ins, mgmt fees): $25,400
Net Operating Income: $22,100
Annual Debt Service: $16,284
Positive Cash Flow: $5,816 (22,100 - 16,284)
CAP rate: 2.1% ($5,816 / $280,000)
Prop #2: 10 units in 1 building
Price: $229,000
Down Payment of $57,250 and Mortgage of $171,750
Annual Rental Income: $56,100
Annual Expenses (incl taxes, ins, mgmt fees): $29,903
Net Operating Income: $26,257
Annual Debt Service: $13,320
Positive Cash Flow: $12,937 (26,257 - 13,320)
CAP Rate: 5.6% ($12,937 / $229,000)
I'll obviously do a thorough inspection done of each building to uncover any capital construction needs or deferred maintenance problems.
Any thoughts? Suggestions? Anything I've overlooked?