[Calc Review] I would love some feedback on this 5-plex!

7 Replies

Hi @Sam Bernard

You are missing your property management fee. Even if you're going to do it yourself, you should pay yourself market rate for it as far as your calculations go. You want the deal to still work with professional management. 

Another thing is that this property will not qualify for a residential loan. You need a commercial loan for it because it's 5 units. 4.2% sounds to me like a residential loan rate. So does 20% down. So does 30 year amortization.

Unless you have already talked to a bank, you should plan for numbers more like this:

1) 25% down

2) 25 year amortization

3) 5.5% interest

4) professional property management will be required by the bank if you are not already experienced with rentals.

@Geordy Rostad Thanks so much! That’s great information to know. Luckily this is a preliminary analysis.  Also, as you can probably tell, I’m brand new to this. But I will be sitting down with a lender who is a good friend and I’ll be able to pick his brain as well. I really appreciate your feedback, this is very helpful for me!

@Sam Bernard

Numbers on expenses are optimistic . Geez it really Looks like a great property to own though . Cash flow sucks for a 5 unit sadly . If you could get the price down it might be worth doing . Your going to be lucky to get 100$ a door when it’s all said and done , hardly exciting

@Sam Bernard What kind of condition are the units in currently and what kind of tenant class will you  be likely to attract? If the units will need significant turnover when the current tenants move out and/or your tenant class is on the lower end I would bump up your repair and cap ex numbers.

@Sam Bernard , to expand on @Geordy Rostad , the bank will also want to see 6 months of reserves at the time of closing.

  • Closing costs will be 2-3X what you have for a commercial loan.
  • What's the prevalent cap rate for a similar property in your area?
  • Have you seen actual rent roles/leases? It's unusual that all the rents are exactly $830/month.
  • What about the last year of expenses (called a Trailing 12 or "T-12")?
  • Is there a house electric expense? I see a light in the parking lot.
  • Any opportunities to push rents?

@Michael Noto I'm not sure yet, this is a pretty preliminary report.  I still need to do a walk through and have a contractor look at it.  Thank you for raising these concerns!  This helps.

@Jaysen Medhurst Those are all great questions!!  Thanks for raising them.  I'll be doing my homework. :)

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