[Calc Review] Help me analyze this deal

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Hello Everyone,


My name is Ivan and I am a real estate investor based in Chicago IL and so far I have done 4 deals ( 2 SFH and 2 condos). 

I am looking at my first multi family unit that I am planning to buy and hold.   I already negotiated the price form $389K to $370K with one year home warranty.  The buildings has 6 legal units 3 2/1 and 3 1/1 plus 2 car garage and coin laundry.  The building is very well maintained and needs only some cosmetic upgrades. The current rent is low for the market so there is a potential to increase with total of $300 plus the garage is not rented at the moment which is an extra $150 .

I will appreciate any opinion or thoughts!

Regards,

Ivan

A couple quick ones:

  • Your closing costs are way low unless you know something I don't or the seller is covering your closing. I think you'll be out of pocket around $6k on this deal maybe more.
  • $0 in repair costs is a stretch- especially if you plan to increase rents...you'll need to justify the higher rent and that typically means improving the condition of the property = $$
  • Your upfront equity position isn't great, but it looks like you'll start with a bit of equity...and if you decide to improve condition you can force the value as your NOI increases
  • Boilers are find if they are modern...looks like yours was replaced in 2017- definite positive
  • 5.3% on the loan doesn't look too bad...your DSCR is 1.15 ...most lenders will require this to be 1.2++
  • Vacancy is relative to your local market...not sure 5% is the right number to use or not...
  • I look at CapEx different for year 1 and consider it an up-front out-of-pocket expense...but it looks like your units are in good condition so 5% may be right...maybe high...
  • Water and sewer (and other utilities) seems low to me, but it's specific to the area...and maybe just for common areas?...
  • Management seems low...never seen a reputable firm below 7% of gross rents
  • You have an ARV of $400k, but your analysis says CAP places value at $323K...if the value is $323k, and you pay $370k?
  • Your description is a 3-story on the last page, but describes as "Flats" on the first page?...
  • Your income and expenses are 2%...this is a sum zero game...
  • Property taxes on a six unit are under $800/yr?...that's rare, but it suggests a lot of things about your building...like the condition, assessed valuation, upside potential, etc...I've personally never seen a 6-unit in a good area with taxes that low...
  • Overall, I think your returns look really low, so I would say this is a relative investment...if it's in great condition in a great area, maybe it makes sense...hard to tell much more without the full property information...

@Ivan Zinginov

Hello @Ivan Zinginov . What are your investing criteria? From the looks of the report, I personally would pass on this deal or significantly negotiate the sales price as it doesn’t pass my criteria of $100/unit cash flow and >12% CoCR. What are your criteria and why are they your criteria?