[Calc Review] Help me analyze this deal

3 Replies

Let me know what you think BiggerPockets!

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*This link comes directly from our calculators, based on information input by the member who posted.

Updated over 2 years ago

The rent income on the report is based on the current leases in place. Over a 12 month spread, the rent will be increased by $500 when lease are renewed/new tenants.

@Jared Coley I looked at this for awhile because I want to see a great deal but I am not sure that I do with this one. It may still work for you but these are the reasons I am giving:

1) I would want to see around $125 in positive cash flow / unit. At $788 you are only at $98 / unit.

2) I see you have only 10% listed for repairs & maintenance and nothing for cap ex. I think you might be a little light based on my guess at the age of the building. It looks to be about 30 - 40 years old which means HVAC and roof may already be on their second rounds and a third could be coming up quickly. I would probably have 8% for repairs & maintenance like broken windows, snow removal/landscaping, and other small repair items. I would also have 7% or more of capital expenditures like a roof, paint, new HVAC, repaving the parking lot, upgrading facilities, etc depending on the amount of differed maintenance from the prior owner. What big expenses are coming up in the future. I know there will be some if you are only planning a rehab of $1k / unit.

3) And this is probably the biggest one, you are missing about $480 / month in a property management fee (roughly 10% of gross rents). If you are going to manage yourself you should still budget for your time. With 8 units and the average renter in a C class unit calling almost twice per month you can expect to get a call every two days. I think you should plan on compensating yourself for it.

I hope this works out for you but just wanted to share my observations in hopes of it giving you extra things to think about. Some of this could already be planned for and I am just not seeing it. I wish you luck and hope this one is a home run for you and if not that you find one soon.

Ryan, 

Thank you for providing your feedback.  I should have included that I own a management company in the same city as the subject property so I will be able to do the following by running certain expense through another business:

1. No management fees.

2. Maintenance will be material only. Labor will be completed by my existing maintenance staff and paid out to the employees by my management company.

The roof, electric meters, and breaker boxes are all 8 years old.

5 of the 8 units have complete new HVAC systems.

What are your thoughts after receiving this information?

Thank you for your help!  Much appreciated!

@Jared Coley What do the rent rolls look like? Is there any room to bump them up.

Also I would still add 1-2% just to cover some labor even though it will be from one of your other businesses, in effect treating it like blue money.

I would also try to offer less. The worst they can say is no👍

Good luck!