FIRST MULTIFAMILY DEAL

6 Replies

hello all,

I just fully rented my first multifamily property. It is a side by side ranch style duplex in a suburb of rochester ny. I closed on October 1st, 2015. It took my dad and I 8 months to rehab 2 apartments.( my first mistake that I will talk about later). That's with me working 2 jobs and my dad also working full time. The apartments needed new floors, painting, some new plumbing, counter tops, doors, trim etc. 1st apt was rented back from previous owner after closing for 2 months @ 710 which was negotiated with price of property. That same apt was rented out febuary 15th @ 900 and 2nd apt now June 1st. @ 1095

Here are my numbers:

Purchase price: 117,000

Down payment: 31,036

Insurance :500

Repairs:6631

Inspection: 250

Carrying cost:

Gas/electric: 679.87

Water:57.19

Garbage: 216.23

Mortgage payments(-710 @ 2 months and 900 @ 3.5 months): 2170

Total cash in: 41,541.

Monthly rents: APT 1 $900 & apt 2 @1095.

Total rent 1995

-30 garbage

-25 water

-100 insurance

-120 repairs/ maintain

-100 vac

-970 mort/ taxes

Cash flow of $650 x 12= 7800. 7800/41541= 18.5% ROI

I plan on managing and lawn care on my own if I do end up outsourcing it the number would be:

-199 management {10%}

-66 lawn care

Cash flow +385 x12= 4620 4620/41541 = 11.5 % ROI

So with self managing the ROI is great not so good if I outsource management

Let me kno what think of these numbers!

My biggest mistake was not outsourcing some work. I could of finished this a lot sooner and got a lot more rent and cut down on carrying cost to increase my ROI. I may of also over paid a tad for the property but it's definitely a learning experience. Any advice or thoughts would be appreciated

Hi @Tom Vic , that looks pretty good for a suburb deal.  I originally thought that was the way to go when I got started but I found suburb multi-families to be priced too high to get the kind of returns I was looking for.  That said, you're getting $325/door which is not too shabby.

One thing I like to do, even though I don't purchase all-cash, is run cash-on-cash #s.  I see a lot of folks on here doing that so I like to compare how others are doing with my own deals.  It's a quick and dirty way to see if I want to pursue something.  I try and shoot for a minimum 10% cash-on-cash.  Using your #s:

Rent/yr  ($23940)

-10% vacancy ($2394)

-10% capital expense ($2394)

-10% prop mgmt ($2394)

- taxes (~$5000, rough guess)

- insurance (~$1000?)

- utilities ($55 x 12 = $660)

= yearly cashflow, $10098

Cashflow per yr/purchase price = $10098/$117000 = 8.63% cash-on-cash

So not bad at all, especially for the burbs.  I am looking at about 9% with my most recent deal (city), but I was super stoked with the condition and location so I don't mind coming a little under.  Last year I hit 12.5% (also city), but that one required some elbow grease to get it up to snuff.

Even though I used COC as a benchmark, my true returns are greater due to financing and doing my own prop mgmt.

I just realized I left out 5% for repairs.  So that would make your yearly cashflow $8901.

$8901/$117000 = 7.61% COC

Thanks @markw 

Yes, i was a little concerned i over paid for property at first. I was looking at suburbs to get my feet wet before i venture out to the city. Which ikno is a different animal in its self.  Im realizing the prices in the suburbs are over priced to hit a good return. All in all happy with the numbers with me self managing for my first deal. 

Ill keep you in mind when I venture into the city and maybe bounce some questions off you. Thanks for your reply

Originally posted by @Mark W. :

Hi @Tom Vic , that looks pretty good for a suburb deal.  I originally thought that was the way to go when I got started but I found suburb multi-families to be priced too high to get the kind of returns I was looking for.  That said, you're getting $325/door which is not too shabby.

One thing I like to do, even though I don't purchase all-cash, is run cash-on-cash #s.  I see a lot of folks on here doing that so I like to compare how others are doing with my own deals.  It's a quick and dirty way to see if I want to pursue something.  I try and shoot for a minimum 10% cash-on-cash.  Using your #s:

Rent/yr  ($23940)

-10% vacancy ($2394)

-10% capital expense ($2394)

-10% prop mgmt ($2394)

- taxes (~$5000, rough guess)

- insurance (~$1000?)

- utilities ($55 x 12 = $660)

= yearly cashflow, $10098

Cashflow per yr/purchase price = $10098/$117000 = 8.63% cash-on-cash

So not bad at all, especially for the burbs.  I am looking at about 9% with my most recent deal (city), but I was super stoked with the condition and location so I don't mind coming a little under.  Last year I hit 12.5% (also city), but that one required some elbow grease to get it up to snuff.

Even though I used COC as a benchmark, my true returns are greater due to financing and doing my own prop mgmt.

This is not a cash-on-cash calculation.  Cash-on-cash = cash flow/cash investment.  Using your number, the cash-on-cash is $10,098/$41,541 OR 24.3%.

The original "ROI" that was posted was more likely that actual cash-on-cash return.

@Kyle H. It's cash-on-cash if the purchase is all cash, i.e. come to closing with $117k cash, which is what I was trying to illustrate.  

Nice job taking the plunge!

Purchase Price 117,000

Closing Costs 3,000

rehab & holding 10,505

total cash for cash on cash calculation = 130,500

gross rents 24000

minus 35% (10% PM, 10% Vacancy reserve, 10A% Capital reserve, 5% repair reserve)

NOI (gross rent - 35%) = 15600

minus operating costs 

insurance 800

water 800

garbage 400

taxes (assume 5k total, not we're not including any interest / principal this is for a cash on cash calculation)

=8600

cash on all cash = 8600 / 130500 = 6.6%

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here