Analysis on a 4-plex - First Potential Deal - would love feedback
Hello all - I wanted to get some input on this potential deal, which would be my first. I know some will see the numbers and be tempted to respond, but please read my thoughts before you do. Some points about me and this property:
- it consists of four 1-bedroom apartments - rented to young professionals
- this is B property in a B neighborhood
- current rents are $2300 ($550x3 and one $650 - the $650 is the newest tenant and the apartments are identical - so it sounds like the rents can be increased in the other 3 upon lease expiration)
- it's listed at $139,900 and has been on the market for about 3 months
- my calculation on this property is based on full asking price and current rents
- The COC ROI is misleading based on the way I did the inputs -- the only cash out of pocket will be closing costs which I've been quoted to be about $7000 out of pocket. The down payment is from a HELOC
- The expenses are below. The $510 decamps to $208 for the HELOC payment, $75 for lawn care/snow removal per month, and $227 monthly in owner paid utilities -quoted by the utility company
- I plan to manage the property, but budgeted for management expense anyway
- Furnace and roof were recently replaced
- Loan terms are 3.75 with 3.125 points (included in the $7k closing costs above per the bank) - 30 year mortgage
- My goal is to buy and hold with an eye on retirement, but of course I'd like to cash flow now. Any cash flow would honestly go toward the HELOC principal right now.
You can see the monthly cash flow as it calculates below. Not impressive at all. My thinking, however, is the management fee would be cash flow for now since I plan to self manage, rents will be corrected and increased by $300/month total making for a likely potential of $530 in cash flow. Talk me in or out of this deal!
| Monthly Income: $2,300.00 | Monthly Expenses: $2,289.26 | Monthly Cashflow: $10.74 | Pro Forma Cap Rate: 3.61% |
| NOI: $5,960.00 | Total Cash Needed: $46,753.91 | Cash on Cash ROI: 0.28% | Purchase Cap Rate: 4.26% |
| Total operating expenses: | Mortgage expenses: | ||
| Vacancy: | $115.00 | Repairs: | $115.00 |
| CapEx: | $230.00 | Water & Sewer: | $20.00 |
| Insurance: | $100.00 | Management: | $230.00 |
| P&I: | $485.92 | Property Taxes: | $483.33 |
| Misc: | $510.00 |