Need help on my first deal. Thanks in advance!

9 Replies

Okay so here it is by the numbers. Cash flow is historically low in my area so we are shooting for $300 or so net cash flow. 

Multi Family Tri-Plex - Fully Rented currently

Strategy: buy and hold

$145,000 asking price (short sale)

$130,000.00 sales price (short sale)

$120,000.00 loan amount (possible 100% or close loan)

$720.00 approximate monthly payment with 6% at 30 years

$1246 taxes per year

$800.00 insurance per year (approximate)

$550 rent income for each unit ($1650 total monthly gross income from rents)

Financing is private and terms could be adjusted as needed. For example possible loan terms will be 6% for 30 years with re-fi option in 3 years. 0% or low % down.

Based on your numbers and a 5% vacancy factor + $2,000 for maintenance and capital expenses + $2,882 for management I get NOI of $11,882 or over a 9 cap on a $130,000 buy price. With a 6% cost of capital I think that is good.

Good Luck.

Bill 

Good deal by the numbers. Don't forget to check local microeconomy: e.g., jobs, income etc...

Originally posted by @Bill Jacobsen :

Based on your numbers and a 5% vacancy factor + $2,000 for maintenance and capital expenses + $2,882 for management I get NOI of $11,882 or over a 9 cap on a $130,000 buy price. With a 6% cost of capital I think that is good.

Good Luck.

Bill 

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Thanks so much for your help. It seems like a pretty good deal to me but I suppose it is just normal to be a little nervous when setting up your first property. Taking on the debt in order to do the deal is a necessary evil but always feels a little spooky. Not sure why that bugs me though since I never have a problem writing payroll checks to my employees at my other business. Takes money to make money. 

My goals on this deal and the next couple properties is pretty simple. To gain a great education in REI and to build a couple nice base properties that will provide nice cash flow and fairly low risk. That is why I'm looking into multi-family properties. Hopefully the right property can provide some nice cash flow and the multi units will protect against vacancy risk.

Acquisition: $130,000.00

GOI:                       $1,650.00/month

Debt Service:            $720.00/month

Vacancy:        (8.3%) $136.95/month

Management: (10%) $165.00/month

Insurance:                 $  66.66/month

Taxes:                       $103.83/month

Maintenance:            $165.00/month

_________________________________

Operating Expenses:$637.44/month

NOI: $1,012.56/month

Cap Rate:                       9.3%

Expenses:                 38.6% of GOI

Cash Flow:                $292.56/month

Seems like a solid deal. Are you planning on a complete renovation once you acquire it? If not please account for Capital Expenses. (Roof, water heaters, HVAC... ect.) 

With a cash flow of around $100/mo per unit, is that within your investment criteria?

Thanks so much for all of your help so far. 

Based on what I have seen so far the property would not need significant updating. However, we have yet to tour the units because we have to make the offer prior to any of that. It does meet my goals as far as cash flow and from what other local REI investors have advised me it is pretty good @ $100 per unit in our area. I'm thinking as long as funding holds I'll go for it and get started on my REI journey.

Quick update: Not much to update yet but we should have a decision within a month or two. Our main concern right now is waiting for bank approval on the Short Sale. Then we can get inside the property for a walk though. So for now we wait. Any advice for us once we get in the property for our due diligence period? I am planning on having my contractor and heating / air guy come take a look at the property for me. If it all checks out we'll make the deal. Supposing that the bank approves the short sale offer we made as is. 

Update: The bank has FINALLY countered back at the list price of $145k. We are considering looking at another counter of $140k for the property. Repairs / rehab is unknown currently until we go look at the property (hopefully today). Thoughts, suggestions are welcome. 

We will manage the property ourselves and for now do an all cash deal with 100% financing at 6%. Updated numbers are below: Am I missing anything

Acquisition: $140,000.00 ()

GOI: $1,650.00/month

Debt Service: $839.00/month ($140k @ 6% 30 year)

Vacancy: (10%) $165/month

Management: (10%) $165.00/month

Insurance: $ 67 /month

Taxes: $104 /month

Maintenance: $165.00/month

_________________________________

Operating Expenses: $501 /month – no debt service

NOI: $1149 /month ($13,788 net annual income)

Cap Rate: 9.8%

Cash Flow: $310 /month

Updated over 2 years ago

Disregard management line - we would be self- managing

After much inspecting the property had what we think is around $5000 of repairs needed. So, back to the bank with photos. $128,000 offer back to them - we'll see where they land on the deal. It still makes money at $140,000 from what I can see. 

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