What would you offer on this 4 Unit

Real Estate Deal Analysis & Advice
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What would you offer on this 4 Unit

Henry R.Pro Member
Rental Property Investor · Saratoga County, NY · Member since 2013 · 178 posts · 73 votes

I'm scheduled to look at this 4-plex later today.

Asking price is $109,900 Price has been lowered to 99,000

My agent is now saying they have a couple of offers

The units are in good condition and fully rented

22500 25% down if bought at 90K
Loan rate 5% 30 yrs
Monthly rental minus 10% vacancy $2070
Home owners 700 yr
taxes 6300 yr
monthly expenses $620 not including PM

RENTAL INCOME 24840 YR
Total expenses 18784
Total loan payments 4344
Cash flow $6056
Intrest expense $ 3375
Depreciation $2945
Total tax deduction $4080
Tax saved -612

Net after tax cash flow $5444 or $453 per month

This is from an on-line Investment Property Calculator.
I kept it as short as I could.

These figures are at 15% discounted price

Purchase Price $93415
Down payment $23,353
Loan rate 5%
Term 30yrs

Monthly rental less 10% $2070
Home owners 700 yr
Taxes $6300 yr
Monthly expenses $620 NO PM

Rental Income 24840
Total Expenses 18952
Cash Flow $ 5888
Intrest Expense $ 3503
Depreciation $3057
Ins, tax, other expenses $14440
Total tax deduction $-3840
Tax saved $-576

After Tax cash flow $5312 or $442/mo.

Taxes are high in NYS.

There is a misc expense that is included in the figures at $ 4739 per/yr, for plumbing,painting furnace repairs( looks new) etc.

Thoughts anyone that is into buy and hold? It's a tad over $100 per door. I know Brandon Turner likes to see $200 per door on a 4plex, that has been tough for me to find at this point.

Does not need any rehab at this point all expenses includes debt service

Does this look like a good deal?

Thanks so much to everyone in advance.

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George Carnicle
Rental Property Investor · Jacksonville, FL · Member since 2014 · 27 posts · 54 votes
12y

I'm new to this website and forums and have been picking my way through different interesting looking threads. This one struck my fancy and I absolutely love the teamwork on display here!

@Henry R. Thank you for posting the question and infos! Best of luck on your deal!

@Aaron Montague @Brandon Turner @Swat Khan @Bill Jacobsen @Walter Ichikawa-Doyle Thank you for the feedback and tips! You guys rock! Can't wait to grow up and be like you! :)

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  • Tuna Hirun
    panorama city, CA · Member since 2013 · 5 posts · 3 votes
    12y

    Hey Henry!

    Awesome stuff thus far. I'm personally not a fan of all units being 1 bedrooms. If I do take on 1 bedrooms only, I usually look for a bigger cushion. So in my opinion, I would negotiate a lower price. Hope to see the next update from you!

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  • Henry R.Pro Member
    OP
    Rental Property Investor · Saratoga County, NY · Member since 2013 · 178 posts · 73 votes
    12y

    @Wendell De Guzman Thank you for showing me those figures. I have been over this many times, I never planned to use a PM because it did cut into the profit by $2300 per year with the after tax income around $7700 per year. At full rental, I also did the numbers with 10% less vacancy. Not any newly built homes in the tri city area I live in for this price range say 75-110k it's all older buildings. I tried to upload the sellers spread sheet but it didn't show.

    He has $100 for Comm/legal/insp not sure what this is really

    $678 ins

    $650 maint, what type I don't know yet

    $830 for repairs not sure what type

    $1086 for supplies not sure what

    $6688 Taxes/water/trash

    $1975/heat but's it's really $2335 or with the budget 200/per month

    $200 painting

    $793 plumbing furnace

    $200 Carpentry

    $20 Roof/Security/COAlarm also it' a slanted/slate roof

    $560 snow/lawn/Termites this can't be for all three

    $1230 Bookeeping/bonus not sure what the bonus is

    Well,Wendell you sure have given me a lot to think about, I haven't heard back yet and I thought I may be on my way to being a real estate investor, that is the reason it's not in my title because I'm not one yet. I believe the sellers totals come to $15410 for the year. I was thinking that the $4739 would not be that much every year but I do see what you mean it raised a flag with me also, and I do know it could be more sometimes. I wanted to find out what he was paying for if I had got the far in the deal.

    @Tuna Hirun I came up from 85k to 90k looking at then numbers as I did it looked like it would cash flow around $633 per month fully rented and no PM even at 95k which I would not offer.

    It's been a long time since I owned a 2 family and that was not from the perspective of a investor. Everything I've learned has been from the day I stumbled on to BP

    Thanks everyone who has responded to this post. This is hard because I really felt I did my due diligence.

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  • Henry R.Pro Member
    OP
    Rental Property Investor · Saratoga County, NY · Member since 2013 · 178 posts · 73 votes
    12y

    @Wendell De Guzman One more thing I notice, book keeping seems way out there at over $100 per month the year total is $1230, that's with a bonus that's crazy. He does not have a loan so he an do things like that.

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  • Henry R.Pro Member
    OP
    Rental Property Investor · Saratoga County, NY · Member since 2013 · 178 posts · 73 votes
    12y

    @Wendell De Guzman I hope you get a chance to respond to this, what price would you need to see this for it to work for an investor?

    The building though I have not had an inspection done, looks to be in "good" condition. Some of the $4735 cost is items like paint $200, book keeping $1230 for the year, snow/lawn/termites $560, not sure which one of those can't be all three. Supplies $1086 not sure if this will be needed yearly or what the supplies are, etc but I would need to find out all of those things before purchasing this building ( if I did at all)

    The seller now wants me to put in writing my best offer ( just found out today)

    So I'm coming to you for much needed advise, what if the building checks out and I can cut the cost of the 4735 in half? I won't do a PM just because it's only a 4plex all one bed rooms, 2 at $525 and 2 at $625. I don't have to buy the place however it is one of the better ones I have come across. The next thing I would try to do is split off the heat to each apt.

    My offer will not go above 90k

    Thanks Wendell.

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  • Wendell De Guzman
    Investor · Chicago, IL · Member since 2013 · 2k+ posts · 1k+ votes
    12y

    put it under contract with due diligence contingency

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  • Henry R.Pro Member
    OP
    Rental Property Investor · Saratoga County, NY · Member since 2013 · 178 posts · 73 votes
    12y

    Thanks @Wendell De Guzman That is what I asked my agent to do last night, however I found out today that the owner took another offer. This was also my first offer from a investor point of view. I owned one 2 family years ago that I lived in, I sold it about 7, 8 years ago after having it for 15 yrs.

    So back to the drawing board, I feel like it was good experience doing that. I was looking forward to gettting my small business started. On to looking for the next 4plex.

    Thanks again!

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