Property Evaluation - Advice on Approximate Figures & Analysis

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Property Evaluation - Advice on Approximate Figures & Analysis

Eli N.
Austin, TX · Member since 2015 · 22 posts · 1 vote

Hello BP folks,

I wanted to get your thoughts on the following when you crunch your numbers on properties (particularly multi-fam prop's).. How much do you compute/estimate the cost (per unit/month) when analyzing a property on the following (I live in Austin if one is wondering):

- Homeowners Insurance: Would it usually be ~ $25/per unit per month, or would that be closer to ~ $60/per unit per month? Am trying to be accurate in my evaluation to ensure some cash-flow.

- Repairs and Maintenance (not only when submitting an offer, which I assume is around ~$5,000 if in decent condition), but also year after year. Is it around ~$200 per unit per multi-plex per month (so around $9,000 per year), or is that too much based on your experience?

- Utilities: Can you not have the tenant pay Garbage, Sewer, Water, Gas, Electricity, or are you obliged to cover certain utilities?

- Accounting and Legal: How much do you estimate accounting and legal fees to cover your end of year taxes, evictions, or contracts?

Separately yet related, which are the greatest determinants for a good deal worth pursuing in your eyes, would it be the income expense Ratio (1%, 2%, 50%), would it be the Monthly Cashflow/DCR, Cash-on-Cash ROI and/or CAP rate to ensure all figures are +ive, or is it a mix per one's personal preference? In other words, what would you consider (vs. certainly disregard or certainly regard) when some of the numbers are not strong/+ive.

Thanks!

Eli

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  • Jay Dewberry
    Covington, GA · Member since 2014 · 295 posts · 93 votes
    10y

    Hi Eli. Do you have a particular property that you're trying to analyze? If you're (let's say) analyzing a multifamily residential unit such as a quadplex, the Homeowners Ins will cover the entire quad. Your best bet is to call around to get some estimates. Where I am, it would be closer to $75 depending on location. If using the BP Calculator, the Repairs and Maintenance are post rehab estimates, which may include...lets say...a broken window, or hole in the wall. The pre-rehab repairs are considered during the Purchase Price section. However to answer your question, many people use anywhere from 7%-12%.

    With utilities, that will again depend on the property, how utilities are metered, and your local laws. 

    Accounting/Legal fees are not usually considered in the calculator as it's not necessarily factored into if the property is a "deal" or not. Nevertheless, if you have approximate figures for Accounting/Legal, technically they can be added to other monthly expenses.

    Lastly, investors typically consider various factors when determining if a deal is worthy or not. It depends on their investing strategy. For instance, commercial apartment investors may look for Cap Rate and IRR (Internal Rate of Return), whereas a multifamily residential investor may want to know ROI and Cash-on-Cash return. It just depends. Hope this helps.

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  • Eli N.
    OP
    Austin, TX · Member since 2015 · 22 posts · 1 vote
    10y

    Thank you @Jay Dewberry & @Account Closed for your quick and helpful message!

    @Jay, when you mentioned close to $75 for home insurance, I take it you meant on the multi-plex as a whole (and not $75/unit for you had mentioned it covers the entire-quad), can you kindly double-confirm?  If you meant the latter ($75/unit in a multiplex) then that will align with @Diala's estimate of $83, or otherwise, we're back to square one...

    Thanks Diala and Jay for all the information, this was very helpful.

    Best Regards,
    Eli

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  • Jay Dewberry
    Covington, GA · Member since 2014 · 295 posts · 93 votes
    10y

    Again, the best way (IMO) is to contact several insurance companies to get some quotes. Many places have it to where you can input the basic info online. At least that way, you'll have a solid idea of what they will be willing to insure your structure for. The $75 I referred to is for the entire quad and, of course, it will just depend on area.

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