Can you help double check my numbers?

5 Replies

My friend put me in touch w/his friend who is an investor (and trying to raise money).  We talked on the phone yesterday and he sounded like a knowledgeable guy.  He then emailed me an "Investment Summary".  I can't figure out if it's a deal he's already done or something he prepared for other potential investors.  There is a lot of missing info and I had to try to piece some of the puzzle together for myself.  It was actually great practice b/c I'm a newbie and this is helping me a lot.  

Anyways, either something just seems very off about this "deal" or my calculations are way off.  Below is a portion of an email I am sending him asking him to confirm/verify my numbers.  Will be interested in hearing his response vs. what you all have to say.

  • Not sure if this is a buy and hold or a flip
  • What does Cash on Cash 1.43x mean? I typically seen it expressed as a %, does it mean 143%, probably not b/c that's astronomical
  • I see the going in Cap Rate but do not see NOI
    • Based off Property Price ($1.07MM) and 4.54% going in CR, this means NOI is roughly $48.8K, is this correct?
    • I will just assume NOI is correct, based off the $1.39MM loan, that would mean $80K in debt services ($6,665 x 12), leaving a $-31.2K cash flow a year, that makes no sense haha
  • Now we have cash flow for year three, we get a -6.7% cash on cash return, again makes no sense
  • Using year 3 sale price as an example ($2.48MM) and the 5% cap rate listed, this means annual NOI is $124K
    • Debt service is $80K, leaving $44K in cash flow, can you confirm this?

Anyone? Really curious as to what your thoughts are...

one last try...

Can anyone help me break these numbers down?

Sounds confusing to me. Why are you not sure if it is a flip or buy and hold? How do you get cash flow in year 3 if it is a flip? I would not invest if I do not fully understand. Just my thoughts...

@Mark K.

What does Cash on Cash 1.43x mean? 

Probably means the person that said it doesn't know what they are talking about.  I never heard it expressed that way. Oh I bet he means 43% total return on original cash investment after 3 years (or 5 or 7 years)  Not a very useful number. 

Based off Property Price ($1.07MM) and 4.54% going in CR, this means NOI is roughly $48.8K, is this correct?

Well not necessarily. Is that before repairs or after? Pro forma implies repairs are needed.

I see the going in Cap Rate but do not see NOI

Exactly what is the point of a projection if you don't even include income. Income is the whole reason people buy income producing properties. 

$179K per unit seems outrageously high to me.

that makes no sense haha

None of it make sense. There simply is not enough info to analyze this property.

Medium crab1 copyNed Carey, Crab Properties LLC | http://baltimorerealestateinvestingblog.com/

Voodoo.  Use Voodoo and you'll get your answers!

It looks like a 3 year flip to me.  Your guess is as good as mine though.