2 Family Analysis
A wholeseller contacted me with this deal. This is the way (I think) I see it -correct me if I'm wrong.
Asking Price: $39,900
Rents: $485 each/$970 total
Taxes: $2,516 (YIKES)
NOI: $485
P/I: $252 (30 years @ 6.5%)
-$112 (for additional ridiculously high taxes)
= $121 or $60 per door
Unless I'm looking at this incorrectly, I think the most one could pay (for ample cash flow) is $28,000:
NOI: $485
P/I: $177 (30 years @ 6.5%)
-$112 (for additional ridiculously high taxes)
= $196 or $98 per door
Am I correct in this assessment? Any input would be appreciated.
Thanks!
Fred
Fred,
I think your analysis is right on the money!
Good Luck,
Mike
You may have a decent deal there at somewhere between 39 and 28. Those taxes seem really high for a 40k property. I know that I pay in the top 10% of tax rates where I live and I only pay at 2% or so. The taxes you quote here are at 6%.
I am not saying that such taxes aren't what is currently being paid on the property but that perhaps it is ripe for someone to demand a reassessment on the property because the assessment is too high. I have found that this is sometimes a way of getting a few extra dollars a month in cashflow.
Thanks for the responses guys. The taxes (unfortunately) are accurate and consistent with others (NY State property taxes are tremendous).
The one caveat is that the owner is offering 30K financing. Does that change the complexation of this deal in anyway?
Based on your experience, how do/have you negotiated with wholesellers, recognizing that their selling price is essentially almost fixed?
The one caveat is that the owner is offering 30K financing. Does that change the complexation of this deal in anyway?
No, it doesn't change the deal, unless it's zero or very low interest rate long term financing.
In this case, it sounds like the wholesaler bought this property right. You just need to find the next deal before the wholesaler. In other words, cut out the middle man.
Good Luck,
Mike
I just received another offer that seems good.
Two house deal (neighboring houses, one 1 fam. one 2 fam.)
One fam. rent: $550
Two fam. rent: $1,200 ($550/$650)
Total asking price for both: $42,000
Would you analyze these properties collectively, or individually? I ran some numbers by arbitrarely stating that the 2 fam. is $30k and the 1 fam. is $22k and under those numbers, I think they work.
Two Fam:
NOI: $600
-P/I: $189
-$101 (additional high taxes)
=$310 ($155 per door)
One Fam:
NOI: $275
-P/I: $139
-$52 (additional high taxes)
=$84
Is this a fairly accurate assessment?
Thanks,
Fred
Fred,
If it's all one deal, I would analyze it as a single deal. Here is how I see it:
Gross rents: $1,750
Operating Expenses: $875
NOI: $875
Mortgage Payment ($42K, 30yr, 7%): $280
Cash flow: $595 per month or $198 per unit per month (less extraordinarily high taxes if you think that's appropriate)
This looks like an EXCELLENT deal to me!
Good Luck,
Mike
Fred...
On the first deal above. You say taxes are 2,516. Doesn't that equate to $209 a month not $112?
If so it'd be 252-209 = $43 or $21.50 a door....a substaintial difference.
I could be looking at that wrong.
Dave
I think by using the 50% rule he already has some of the taxes included in his expense number.