Am I being too conservative when analyzing deals? (Philadelphia suburbs multifamily, PA, Pennsylvania)
When analyzing deals (multifamily rentals, usually 4-20 units) I have found that it is rare that a deal meets my criteria (even when it meets the 1% rule). I am typically looking for at least $100 cash flow per unit and at least a 10% cash on cash return.
I like to be conservative when underwriting annual expenses, and my typical underwriting guidelines are:
| Insurance - $500/unit |
| Trash Removal - $1000 for under 10 units, $2000 for over 10 units |
| Advertising & Marketing - $250/unit |
| Liscenses & Fees - $50 to $100/unit depending on county |
| Repairs and Maintenance - 5% of gross rental income |
| Snow Removal & Landscaping - $1000 |
| Management Fees - 5% of gross rental income |
| Real Estate Taxes - from public record |
| Utilities - use figures from listing or $150 per month per unit |
Could it be that most listings are grossly overpriced or am I being too conservative? Any input on my expense figures would be greatly appreciated.