MFR Analysis in SF Bay Area

1 Reply

I am practicing my deal analysis skill on MFR. Looking at couple properties in Loopnet (I know these are not the best place to find deals) since it has many listing to work with.
Granted I am just using proforma values, here is what I came up with. I just wanted to throw this out here for inputs from others.

So here is a 4 plex property in San Mateo:
Price: $1.75M
No. Units: 4
Cap Rate: 5.39%
GRM: 13.63

Assumptions:
Down payment: 30% (525K)
Mortgage (5% 30yrs Amortization): 6576/month
NOI: 7860/month (from cap rate)

Cash flow = 7860 – 6,576 = 1284/month (2.9% COCR)

I know this is icing but principle pay down will be1500/month (in the first year. 2nd year is 1600/month)
So you will build equity 2784/month (6.3% COCR) without appreciation. Probably not the best deal to say the least.

Here is another 8 plex in San Mateo:

Price: $4M

No. Units: 8

Cap Rate: 4.2%

GRM: 18.2

Assumptions:

Down payment: 30% (1.2M)

Mortgage (5% 30yrs Amortization): 15031/month

NOI: 14000/month (from cap rate)

Cash flow = 14000 – 15031= -1031/month

I know this is icing but principle pay down will be 3400/month (in the first year. 2nd year is 3600/month)

So you will build equity 2369/month without appreciation. Not sure investors here go for negative cash flow for the appreciation play but not a good deal for me at least. This property will probably be a pure appreciation play unless the price can be negotiated down or there are significant expense that can be cut or income that could be increased. 

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