[Calc Review] Help me analyze this deal SW Cedar Rapids IA

13 Replies

Hi everyone! I was recently approached by an investor who wants to sell their quadplex in the SW side of Cedar Rapids IA. This is the first quadplex I'm considering purchasing but I'm worried that my numbers are too conservative. I've linked the report below. Big takeaways 

Asking Price: $145,000

Gross Rent: $2,500 (some of the units are below market rent so I'm assuming I can raise rents to at least $625 a unit)

Cashflow: $169 (This seems awfully low for a quadplex considering it's much better than the 1% rule)

Any advice would be greatly appreciated! My biggest concerns are that I'm assuming too low of a monthly rent and that I've overinflated the cost of maintenance and capex.

View report

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

Howdy @McKensie Hogstrom

Are the expense amounts numbers you came up with or did the Seller provide anything?

You may be over conservative with your numbers. Look at the Cash Flow using the 50% Rule. $569 per month is probably more acceptable to you (and me). The property looks to be newer than 70's/80's therefore probably will not require 10% of Income for Maintenance. 5% would be sufficient for now. I would leave CapEx at 10% until you can have the property inspected. Once you determine the current condition and life expectancy of all major components and appliances you can adjust the CapEx reserves requirement.

What are you including in the $200 Misc?  This number may or may not be lower.  Try to get as much actual costs from the Seller to help.

@John Leavelle the expense amounts are numbers I came up with. We're meeting with the sellers tomorrow to get more information about the property. I know the roof was replaced 3 years ago as well as 3 water heaters. Because of the flood in 2008 most of the inside has been replaced on the lower two units including the appliances. Thank you for your input!
Thanks for your guy's input. We negotiated with the sellers to 135k and they're willing to finance 20% of the down payment. We've never done a deal like this so how do we structure a deal where the bank loans 80% and the seller loans the down payment?

I have never done a deal that way so not the best person to ask.  The seller will have to be in the second position meaning that if the bank forecloses, the bank gets all their money first and it there is anything left, the second position, in this case the seller holding a note for 20% gets paid if their is anything left over.  Most people won't loan you money if they are not the first position.  It will be intersting to hear others' opinions.  Like I said, not something I'm experienced with.