Looking into buy my first 4-plex in a metropolitan area in Central Valley California -Did I get the numbers right?

11 Replies

The Property is located in a class C area, right in front of a nice park and close to downtown, shopping malls, churches and a hospital.

I walked there at night and I felt safe. Also, during the day I saw families and low traffic. 

Everything is new, with resistant materials and decent finishing. All appliances: including dishwasher and washer machine in every unit. it's a turn key property.

Am I missing something? I know there are several variables, but in general and roughly, from 1 to 10 what would be your rate for this investment?

Any tips will be greatly appreciated :)

(3) 1bed 1bath  and (1) 2bed-1bath

Purchase price is 225,000

Monthly Income:
$2,440.00
Monthly Expenses:
$1,708.87
Monthly Cashflow:
$731.13
Pro Forma Cap Rate:
8.57%
NOI:
$19,718.00
Total Cash Needed:
$50,000.00
Cash on Cash ROI:
17.55%
Purchase Cap Rate:
8.76%
Total operating expenses:Mortgage expenses:
Vacancy:$122.00CapEx:$122.00
Electricity:$20.00Water:$50.00
Sewage:$50.00Garbage:$20.00
Insurance:$50.00Management:$122.00
P&I:$912.03Property Taxes:$190.83




I apologize, but for some reason the format I used to show the numbers doesn't work properly here. Please see below.

Monthly Income:

$2,440.00

Monthly Expenses: $1,708.87

Monthly Cashflow: $731.13

Pro Forma Cap Rate: 8.57%

NOI: $19,718.00

Total Cash Needed: $50,000.00

Cash on Cash ROI: 17.55%

Purchase Cap Rate: 8.76%

Total operating expenses: 796.83 ($9,562)

Mortgage expenses: $912.03 ($10,944)

Vacancy:$122.00

CapEx:$122.00

Electricity:$20.00

Water:$50.00

Sewage:$50.00

Garbage:$20.00

Insurance:$50.00

Management:$122.00

P&I:$912.03

Property Taxes:$190.83 

@benleybovich

why 150,000? dd you use a mortgage calculator to determine the new payments for that? and p&i?

Hey Ariel, i'm slightly confused, maybe i missed something. You listed your monthly cash flow at 731.13 which would give you a yearly NOI of $8774.76. You listed your NOI at 19,718 which would give you a monthly cash flow of $1643. which one is correct?

5% repair and 5% CAPEX are both pretty low... what about cutting the grass? Those utilities numbers seem a bit low but if you've verified them I'll take your word...

IMO, expecting your operating expenses to be 33% WITH property management is beyond optimistic...

Hey Jeff the NOI didn't include debit service, that is why, I used the BP calculator.
Thanks a lot for taking a look at it!

Hey Jeff the NOI didn't include debit service, that is why, I used the BP calculator.
Thanks a lot for taking a look at it!
Also thanks Nathan for tip on the expenses, I'll recalculate it, the building just went through a massive renovation so I thought it wouldn't require much maintenance in the first few years.

Originally posted by @Ariel Gomes :

Hey Jeff the NOI didn't include debit service, that is why, I used the BP calculator.
Thanks a lot for taking a look at it!

What is debit service and why would it be included in operating income? 

Hi Bob,

The debit service in this case would be the mortgage payment.

Originally posted by @Ariel Gomes :

Hi Bob,

The debit service in this case would be the mortgage payment.

OK, That would be DEBT service and it is not considered an operating expense so it does not affect NOI.

I was just explaining Jeff that the NOI didn't take into account the mortgage payment, thus why the cash flow was $731.13 as oppose to $ 1.643. I apologize for the misspell before. Please correct if I am wrong.

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