Which rental property will be a better deal?

Question

Hello.

I am trying to analyze  these two deals .  What do you guys think about these  two 6 Flats for sale , these 2 deals?. Is any of them a good deal or not? Any thought on this. I am a novice and I am trying to analyze those deals .. What price would be acceptable  to make a good deal if I was ready to buy any of them??  what do you guys think would be a reasonable price to buy for rental? Do they produce a ok cash flow or not?  Any thought on this one?

Please help. Thank you

Maggie G. · Answer

thank you so  much, I agree, I think  $200 per door would be great.  The one in burbank is listed   on the market  almost 1 year. Great advice!! Thanks  Alex.

Alex Linden · Answer

Well @Maggie G., from what I can see, the first property is simply not that great of an investment unless you are able to either greatly decrease the purchase price or generate additional rental income/decrease monthly expenses. The numbers posted from your calculator simply don't add up as a good investment, even in the long term you still wind up at a negative or very small ROI.

The second investment is at least positive in terms of Cash flow; however, at only about $400 per month in Cash flow, the property still falls short of the minimum $100 per door in monthly cash flow that I have seen recommended many times on BP. Keep in mind, you should choose your own standards for a minimum monthly cash flow based on the area's market as well as your level of comfort and goal sets!

In addition, there are other reasons I would personally not invest in either property, but I do generally err on the side of caution. All in all though, the most common recommendation I have seen as to a minimum per door monthly cash flow is between $100 - $200.

-Alex

Maggie G. · Answer

so my  question is  : what would be   a minimum  , an  acceptable  cash flow  (ROI )  for  6 units building?

Maggie G. · Answer

HERE  ARET  THE  LINKS  FOR  BOTH  6  FLATS    BP  WORKSHEETS ..our PDF can be found at the below link for the next 7 days.

https://www.biggerpockets.com/calculators/shared/685230/576502c4-2709-46e3-bd3f-bbad216f794c

Your PDF can be found at the below link for the next 7 days.

https://www.biggerpockets.com/calculators/shared/685230/1e1db496-6684-4980-8451-05acffcf68be

Close

Maggie G. · Answer

sorry, I wa strying to attach  BP  analysis  worksheet  but  it didnt let me do it, I have no clue  how to do that................. I have tried  few  times  with no Success  whatsoever!!!!

Maggie G. · Answer

7914 W.82nd ave,Justice ,IL 60458, Justice, ILLINOIS 60458

MLS number: 08246034.

6 Flat with 1/4 bedroom Basement Apt or Studio

Monthly Income:

Monthly Expenses:

Monthly Cash Flow:

Pro Forma Cap Rate:

$4,300.00

$4,961.40

-$661.40

3.36%

NOI

Total Cash Needed

Cash on Cash ROI

Purchase Cap Rate

$16,800.00

$116,000.00

-6.84%

3.50%

Property Information

MLS Number: 08246034

Purchase Price:

$480,000.00

Purchase Closing Costs:

$5,000.00

Estimated Repair Costs:

$15,000.00

Total Cost of Project:

$500,000.00

After Repair Value

$500,000.00

Property Description

6 Flat with 1/4 bedroom Basement Apt or Studio

Down Payment:

$96,000.00

Loan Amount:

$384,000.00

Loan Points:

$0.00

Loan Fees:

Amortized Over:

30 years

Loan Interest Rate:

5.000%

Monthly P&I:

$2,061.40

Income

Rent

$4,100.00

Other

$200.00

Total

$4,300.00

Expenses

Vacancy

$215.00 (5%)

Repairs

$215.00 (5%)

CapEx

$430.00 (10%)

Electricity

$40.00 (1%)

Water & Sewer

$215.00 (5%)

Garbage

$107.00 (2%)

HOA

$267.00 (6%)

Insurance

$170.00 (4%)

P&I

$2,061.40 (48%)

Property Taxes

$1,152.00 (27%)

Misc

$89.00 (2%)

Total

$4,961.40 (115%)

Buy & Hold Analysis - 03/02/17 02:01:00

PM Page 1 of 3

Calculations based on a 31-day month. The calculators found on BiggerPockets are designed to be used for informational and educational purposes

only, and when used alone, do not constitute investment advice. BiggerPockets recommends that you seek the advice of a real estate professional

before making any type of investment. The results presented may not reflect the actual return of your own investments. BiggerPockets is not responsible

for the consequences of any decisions or actions taken in reliance upon or as a result of the information provided by these tools. Furthermore,

BiggerPockets is not responsible for any human or mechanical errors or omissions.

Financial Projections

Total Initial Equity:

$116,000.00

Gross Rent Multiplier:

9.30

Income-Expense Ratio (2% Rule):

0.86%

ARV based on Cap Rate:

-

50% Rule Cash Flow Estimates

Total Monthly Income:

$4,300.00

x50% for Expenses:

$2,150.00

Monthly Payment/Interest Payment:

$2,061.40

Total Monthly Cashflow using 50% Rule:

$88.60

6 Flat in Burbank, IL (copy)

6148 W.79th st, Burbank, IL, Burbank, ILLINOIS` 60459

Monthly Income:

Monthly Expenses:

Monthly Cash Flow:

Pro Forma Cap Rate:

$4,550.00

$4,246.42

$303.58

5.95%

NOI

Total Cash Needed

Cash on Cash ROI

Purchase Cap Rate

$27,349.00

$98,000.00

3.72%

5.95%

Property Information

MLS Number: 09262104

Purchase Price:

$460,000.00

Purchase Closing Costs:

$5,000.00

Estimated Repair Costs:

$1,000.00

Total Cost of Project:

$466,000.00

After Repair Value

$460,000.00

Down Payment:

$92,000.00

Loan Amount:

$368,000.00

Loan Points:

$0.00

Loan Fees:

Amortized Over:

30 years

Loan Interest Rate:

5.000%

Monthly P&I:

$1,975.50

Rent

$4,350.00

Other

$200.00

Total

$4,550.00

Expenses

Vacancy

$227.50 (5%)

Repairs

$227.50 (5%)

CapEx

$227.50 (5%)

Electricity

$50.00 (1%)

Water & Sewer

$150.00 (3%)

Garbage

$170.00 (4%)

Insurance

$250.00 (5%)

P&I

$1,975.50 (43%)

Property Taxes

$938.42 (21%)

Misc

$30.00 (1%)

Total

$4,246.42 (93%

Financial Projections

Total Initial Equity:

$92,000.00

Gross Rent Multiplier:

8.42

Income-Expense Ratio (2% Rule):

0.98%

ARV based on Cap Rate:

-

50% Rule Cash Flow Estimates

Total Monthly Income:

$4,550.00

x50% for Expenses:

$2,275.00

Monthly Payment/Interest Payment:

$1,975.50

Total Monthly Cashflow using 50% Rule:

$299.50

7914 W.82nd ave,Justice ,IL 60458, Justice, ILLINOIS 60458

MLS number: 08246034.

6 Flat with 1/4 bedroom Basement Apt or Studio

Purchase Price:

$480,000.00

Purchase Closing Costs:

$5,000.00

Estimated Repairs:

$15,000.00

Total Project Cost:

$500,000.00

After Repair Value:

$500,000.00

Down Payment:

$96,000.00

Loan Amount:

$384,000.00

Loan Points:

$0.00

Loan Fees:

Amortized Over:

30 years

Loan Interest Rate:

5.000%

Monthly P&I:

$2,061.40

Total Cash Needed   By Borrower:

$116,000.00

Monthly Income:   $4,300.00

Monthly Expenses:   $4,961.40

Monthly Cashflow:   -$661.40

Pro Forma Cap Rate:   3.36%

NOI:   $16,800.00

Total Cash Needed:   $116,000.00

Cash on Cash ROI:   -6.84%

Purchase Cap Rate:   3.50%

• Expenses
• Income
• 50% Rule

Total operating expenses:

$2,900.00

Mortgage expenses:

$2,061.40

Vacancy:

$215.00

Repairs:

$215.00

CapEx:

$430.00

Electricity:

$40.00

Water & Sewer:

$215.00

Garbage:

$107.00

HOA:

$267.00

Insurance:

$170.00

P&I:

$2,061.40

Property Taxes:

$1,152.00

Misc:

$89.00

Analysis Over Time Hide Assumptions

0%/year  Income Increase

0%/year  Property Value Increase

Year   1

Year   2

Year   3

Year   4

Year   10

Year   20

Year   30

Total Annual Income

$51,600.00

Total Annual Expenses   Operating Expenses   Mortgage Payment

$59,536.74   $34,800.00   $24,736.74

$34,800.00   $34,800.00   —

Total Annual Cashflow

-$7,936.74

$16,800.00

Cash on Cash ROI

-6.84%

14.48%

Property Value

$500,000.00

Equity

$121,665.40

$127,620.66

$133,880.60

$140,460.80

$187,646.47

$305,648.89

$500,000.00

Loan Balance

$378,334.60

$372,379.34

$366,119.40

$359,539.20

$312,353.53

$194,351.11

—

Total Profit if Sold

-$2,271.34

-$4,252.82

-$5,929.62

-$7,286.16

-$7,720.93

$30,914.09

$170,634.53

Annualized Total Return

-1.96%

-1.85%

-1.73%

-1.61%

-0.69%

1.19%

3.06%

Monthly Income: Monthly Expenses: Monthly Cash Flow: Pro Forma Cap Rate: $4,300.00 $4,961.40 -$661.40 3.36% NOI Total Cash Needed Cash on Cash ROI Purchase Cap Rate $16,800.00 $116,000.00 -6.84% 3.50% Property Information MLS Number: 08246034 Purchase Price: $480,000.00 Purchase Closing Costs: $5,000.00 Estimated Repair Costs: $15,000.00 Total Cost of Project: $500,000.00 After Repair Value $500,000.00 Property Description 6 Flat with 1/4 bedroom Basement Apt or Studio Down Payment: $96,000.00 Loan Amount: $384,000.00 Loan Points: $0.00 Loan Fees: Amortized Over: 30 years Loan Interest Rate: 5.000% Monthly P&I: $2,061.40 Income Rent $4,100.00 Other $200.00 Total $4,300.00 Expenses Vacancy $215.00 (5%) Repairs $215.00 (5%) CapEx $430.00 (10%) Electricity $40.00 (1%) Water & Sewer $215.00 (5%) Garbage $107.00 (2%) HOA $267.00 (6%) Insurance $170.00 (4%) P&I $2,061.40 (48%) Property Taxes $1,152.00 (27%) Misc $89.00 (2%) Total $4,961.40 (115%) Buy & Hold Analysis - 03/02/17 01:58:53 PM Page 1 of 3 Calculations based on a 31-day month. The calculators found on BiggerPockets are designed to be used for informational and educational purposes only, and when used alone, do not constitute investment advice. BiggerPockets recommends that you seek the advice of a real estate professional before making any type of investment. The results presented may not reflect the actual return of your own investments. BiggerPockets is not responsible for the consequences of any decisions or actions taken in reliance upon or as a result of the information provided by these tools. Furthermore, BiggerPockets is not responsible for any human or mechanical errors or omissions. Financial Projections Total Initial Equity: $116,000.00 Gross Rent Multiplier: 9.30 Income-Expense Ratio (2% Rule): 0.86% ARV based on Cap Rate: - 50% Rule Cash Flow Estimates Total Monthly Income: $4,300.00 x50% for Expenses: $2,150.00 Monthly Payment/Interest Payment: $2,061.40 Total Monthly Cashflow using 50% Rule: $88.60 Analysis Over Time Year 1 Year 2 Year 3 Year 4 Year 10 Year 20 Year 30 Total Annual Income $51,600 $51,600 $51,600 $51,600 $51,600 $51,600 $51,600 Total Annual Expenses $59,537 $59,537 $59,537 $59,537 $59,537 $59,537 $34,800 Total Annual Cashflow -$7,937 -$7,937 -$7,937 -$7,937 -$7,937 -$7,937 $16,800 Cash on Cash ROI -6.84% -6.84% -6.84% -6.84% -6.84% -6.84% 14.48% Property Value $500,000 $500,000 $500,000 $500,000 $500,000 $500,000 $500,000 Equity $121,665 $127,621 $133,881 $140,461 $187,646 $305,649 $500,000 Loan Balance $378,335 $372,379 $366,119 $359,539 $312,354 $194,351 $0 Total Profit if Sold -$2,271 -$4,253 -$5,930 -$7,286 -$7,721 $30,914 $170,635 Annualized Total Return -2% -2% -2% -2% -1% 1

John Leavelle · Answer

@Maggie G.

??????  What deals?