I'm currently crunching some numbers for small multifamily properties throughout central Ohio and wanted to see if I'm on the right track when it comes to my underwriting assumptions. As an example, below is a duplex that I ran some numbers on:
Here are some assumptions:
A few additional notes:
- Utilized current in-place rents for the 2 units, which is lower than market rents for similar unit types within a 1-mile radius of the subject property based on a quick look on Rentometer.
- Seems like counties in Ohio charges RE Taxes based on Millage Rate times 35% of Assessed Value. I utilized the current Millage Rate times my proposed offer price of $100,000 for RE Taxes in my proforma. The subject property did not have Special Assessments on its RE Tax bill, so I did not include any in my proforma (should I include Special Assessments, to be conservative?)
Does my analysis and underwriting assumptions look to be reasonable, or am I being way too aggressive (or conservative) with my numbers? Would love to hear all your thoughts!
You’re not going to get that interest rate unless you pay a lot of points. Probably closer to 5.5 percent. I don’t see closing costs accounted for either
Howdy @Jeff Chen
Overall I think you are doing a good conservative analysis. You might want to add a comment on the condition of the property or estimate any Rehab needed. If the rents are below market rates be sure why that is. Is the condition equal to market rate properties? Or has the current owner failed to raise them over time?
Yes, don’t forget Closing costs.
As far as the interest rates go I can get what you have. Excellent credit rating or paying points. They are going up though. Be sure to shop around.
@Caleb Heimsoth Thanks for the tip regarding closing costs. I'll definitely add that to my analysis
@John Leavelle Good point on including analyzing the correlation between the condition of the property and current in-place rents. I'll most likely be walking through properties I make offers on with an inspector and contractor in order to learn what they look at and get a better feel at repair/rehab costs.