Texas 4 plex MFH 2 bed/1 bath each

9 Replies

Hello BP. I found this deal that seems promising and I wanted to run it by someone to see if I am missing anything. Note: The numbers listed are provided by the seller and haven't been verified yet. Some numbers are estimated by me which are marked in parentheses. The neighborhood is not the best. The schools average a 3 out of 10 (range 2-4) from preschool to high school. Walk score is 67, transit score 48 and bike score 56. On a neighborhood ranking website it scored a 59, while Texas scored 69. 

Details:

4 plex MFH in Texas

Each 2 bed 1 bath 

Price: $250,000

Mthly details:

Income: $3,350

Expenses:

Tax: $65

Insurance: $227

Garden: $80 (this is my estimate)

Repairs: $200 (this is my estimate)

Vacancy: 0% 

CapEx: $200 (this is my estimate)

Prop Mgr: $335 (this is my estimate, 10% of income. Is this accurate?)

Loan: $1037 (Principle and interest)

Total Exp: $2144

Dwn Pymt: $50,000

Close Cost: $4,300 (not sure about this one, I was told it's roughly $1300/$100K, any input would be greatly appreciated)

Rehab: $0 (Although, it may need some, but nothing is critically in need of rehabbing). 

Cash Flow: $1206

Cash Flow/yr: $14,472

Cash on cash ROI: 26.6%

Cap Rate: 10.7% (seller list the NOI as $26,789 and GOI as $40,200, so expenses are roughly 33%)

IRR: 22.3% (see attachment)

This would be my first deal ever and first out of state deal, which makes things more complex and daunting. 

Thanks for taking the time to look it over and providing any feedback.

Howdy! Is vacancy 0% in that area?

Jovon Itwaru

    Originally posted by @Jovon Itwaru :

    Howdy! Is vacancy 0% in that area?

     Howdy! I don't know, I doubt it, but it is what the seller is stating, which needs verification. I know vacancy is usually 5% and even with that it would still cash flow positive.

    On paper this looks good. Even with vacancy @ 5%, your cashflow is very nice ( > $200/door). I would double check the rents with craigslist, hotpads or with a real estate agent to ensure you can get those amounts. Also, with PM, check for their tenant placement fee and yearly renewal fee.

    Jovon Itwaru

      Where exactly is this quad-plex?

      Giovanny Garcia

        Neems Yamin. I would question the Tax number. Hard to believe you could find anyplace in Texas with property taxes of only $65 per month. You should be able to find the tax rate on the county appraisal district website. I would expect the rate to be in the area of 2.2% - 2.5% per hundred dollars of Taxable Value.

        Jim Cummings

          Your property taxes of $800 /yr indicates a tax value of $30,000-40000 so something is amiss there

          Capex for a 4 plea that surely is around 3000sf is going to be much more than $2400 yr. More than likely this is an older building and it will more than likely be 2 to 3 times that

          Greg H.

            @Jim Cummings - I checked the county website and the taxable value is $28,600. The current owner is late on last years taxes. 

            @Greg H. - I used Brandon Turner's method for estimating costs on a rental property from his video "how to calculate the numbers on a rental property" (https://www.youtube.com/watch?v=T_7vhsSBi7c). From the pics (very few), it is older, but it seems livable (i.e. roof is crashing). It's about 2640 sq ft. 

            What am I missing here? Thanks for any advice.

            @Neems Y. Texas likes its property taxes, trust me I know. It’s a

            Safe bet that they will reassess the property within a year or two to the local tax rate times 90-100% of your purchase price.

            Daniel J.

              Originally posted by @Daniel J. :

              @Neems Yamin Texas likes its property taxes, trust me I know. It’s a

              Safe bet that they will reassess the property within a year or two to the local tax rate times 90-100% of your purchase price.

               Hi Daniel. Thank you for the response and words of wisdom.

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