Help analyze 4plex for Buy&Hold

9 Replies

L&G,

Trying to start on my next deal. I have 2 properties that are doing reasonably ok, but feel like I still lack experience when it comes to analyzing deals, especially MF.  How does this 4plex numbers look?

  • Price: $200K
  • HOA, Insurance,Tax Combined: $1050 monthly (verified on P&L)
  • Est. Mortgage: $750 ( regular investment loan, 20% down)
  • Monthly Revenue: $3,000

I plan to manage it myself for now, but it will go under PM sooner or later. Would love to hear your thoughts on this. Thanks!

Im not an expert by any means. But with those numbers I would definitely go for it. It seems like a pretty good deal to me. But I lack the experience and knowledge of owning a 4plex so I'm not really sure what the numbers on that kind of deal typically look like.

Good Luck!

Maintenance, vacancy, and pm at 30% (10% each) 900.00. 750 mortgage, 1050 tax HOA and insurance... Leaving you a 300 dollar profit. Personally I will not look at a property with an HOA. All depends on your goals and what'll you want out of it.

Originally posted by @Kyle Penland :

Maintenance, vacancy, and pm at 30% (10% each) 900.00. 750 mortgage, 1050 tax HOA and insurance... Leaving you a 300 dollar profit. Personally I will not look at a property with an HOA. All depends on your goals and what'll you want out of it.

Just learning, but why would you not look at a property with an HOA?

It just eats in to your profit and the major negative is they can vote to do major repairs and you fit the bill and nothing you can do about it. For example my first flip where I fought the HOA AND LOST was awful. My mortgage was 550.00 ( I was in college and had no money) and then HOA voted to paint the buildings, and do work on the pool. It changed my HOA from 295.00 monthly to 595. For three months. If that happens to you in this deal, you will be cash flow negative. Just a bad experience that I had and it influenced me forever.

Hi @Michael L.  

The numbers are below:

Rent Assumptions:

  • Monthly Rent 3000
  • Vacancy 10%

Finance Strategy based on what I gather:

  • Down payment - 20%
  • Interest Rate ~3.9%
  • Term 30 years 
  • Debt Service ~755

Total Purchase Cost 200k | Mortgage Amount 160k | Capital Reqd 40k + Closing Cost 2% i.e 4000

Opex Assumptions: Insurance + HOA + Tax = $12600

Also Add - Property Management Rate (even if you are self managing) 10% Repair Rate 8% + Maintenance 8% i.e. total opex = $12600 +$8424 = $21024

Your cash on cash would be -6.2%, You would loose $ 2800 Yr1 

Would you still buy? 

Hope that helps 

Azeez K., Real Estate Agent in GA (#360027)

@Michael L.  FYI the above is simply based on assumptions and does not account location, construction, rental rates and other variables which could make things positive or negative. 

Let us know what u decide. Good luck 

Azeez K., Real Estate Agent in GA (#360027)
 @Azeez K. Thanks for your analysis. I think that 10% vacancy rate in that area could only be justified by some issues, like an eviction, which of course, may happen at anytime. Most tenants are long term and there seems to be no problem with vacancy. On the other hand Houston is getting ready to cool down due to low oil prices, so that may change as well.

Does anybody own any MF around Houston area just to compare and see what good numbers should look like? I keep looking and struggle to find anything that compares better. Anybody with good local knowledge of the area? Our taxes are a lot higher than in other states, so that must eat a lot into profits.

My goal is to establish some sort of steady cash flow even if it's not the most aggressive return. I'm focused on my career which takes up majority of my time, so RE for now, is just the way for me to invest somewhere and not keeping money sitting in the bank. Thanks for your responses!

@Michael L.  you are most welcome. I am tagging @Mohammed S.   who is based in Houston and evaluating MF may be he can shed some light.

Sorry I am not as familiar with the Houston MF market. But it seems like if the property is newer you could lower the maintenance and repair rate assumptions the property may cash flow. 

Anyways Good Luck and hope some Houstonians familiar w MF respond to this thread. 

Azeez K., Real Estate Agent in GA (#360027)

Area aside, I strongly agree with @Kyle Penland in regards to investing in properties with HOAs. These dues do nothing but eat into your profits month in and month out. Also, while there is the threat of a 1 time assessment (the association charging its residents a 1 time fee that will generally cover a large project) there is also the inevitable increase of HOA dues every couple of years. Will you be able to increase your rents to keep up with these HOA increases?

In my opinion, the HOAs eat profit and are costs that impact your property that you have little/no control over... that is unless you want to get on the board at the community... but that requires time/effort.

Best of luck.