Deal Analysis Numbers

6 Replies

Hello! Running the numbers to a local property in my area Westchester, NY . I know this deal is not so good as the CACROI is very low but my main interest is if my numbers/formulas are correct. I've been scanning the local area to buy my first multifamily unit. I will live in one half and a tenant will occupy the other. Let me know what you think and if i am missing anything!

My goal is to find a property in the near future that can provide me with a cash on cash ROI of 8% or more. If you see anything that looks wrong please correct me. Just looking to learn. Thanks

Jimmy

Looks like a great deal for the area. 3% set aside for CapEx though? That seems low to me. Is the place in good shape?

I also agree that 3% for capex and repairs is pretty low unless this is a new build. 

Also is the 1550 for 1 unit or 2? You mention you were looking for a duplex, but didn't say how many units are in this property. If these numbers are rent for 1/2 of a duplex and you'd live in the other then this would be a great deal of the 1550 would be for each unit after you move out.

@Victor Steffen good catch on your part that is a typo! Capex was supposed to be $65. Place is in pretty good shape. Everything remodeled floors, roof, appliances, water heater. That would bring me to a capex of 4% is that still low though? I hear some people saying minimum 5%

@Donald S yes the rent would be $1550 per unit. Id probably live in one of the units for 8-10 months just to get my feet wet in land lording. What do you think capex and maintenance repairs should be? I keep hearing 5% for each of them. What do you think? Thanks

Jimmy

If those numbers are with you living there, and after you move out the gross rent would go to 3100 with no new expenses then this looks like a great deal. Have you run numbers for what out would be after you move? 

How much you reserve depends on age, condition, and a few other factors like 'Do I want to save the reserves because ill need them to replace items' or 'i save the reserves to make sure I'm profitable in the long run'. The first type of person should probably sock away more until they have a good size cap ex reserve fund. The other guy is just doing it on paper. 

I like to determine how long each major thing has left in years, divide the avg cost per item by number of months remaining, and reserve about that much. It usually comes to 7-10% depending on the age of the items. My new place got a new roof last year, so it's got 24 years of life, not much per month to save for. One of the furnaces though could go next week, so I'll account for that on paper as though I'm replacing it now. 

@Jimmy Ready You should assume the rent on both units. Just because you live in one does not mean the property analysis should be penalized by not taking into account the rent from the other unit. 

You will also need to adjust your expense #s accordingly. I would budget additional capex repairs (5-8%). Your property might be in excellent condition right now but you never know when things go awry. Best to set aside some money every month and not be caught by surprise.

Join the Largest Real Estate Investing Community

Basic membership is free, forever.