5 unit in moderate neighborhood with $600 cashflow

3 Replies

@Jared Bartman , as far as your expenses:

  • I'd bump repairs and CapEx to 15% combined.
  • Water and sewer might be a little high. Have you confirmed with the city? They'll give you the charges for the last year.
  • The listing mentions that the owner pays "common area gas heat," but you don't have an expense for that.
  • What about management? Probably around 10%. Include this in your underwriting, even if you plan to self-manage.
  • Any lawn care or snow removal?

Other than that:

  • A commercial loan will likely require 25% down.
  • Have you shopped around for loans? I bet you can do a little better than this. Talk to some credit unions.
  • Increase your budget for initial repairs. At least $5k. There's always something.
  • What does "2 Hot Water tanks are a plus" mean in the listing? Are they new? 
  • What's your local Cap Rate? How does this deal compare?

Where is this located? 


Trash is also very low. 

Vacancy is probably too low. 8-10% is more normal in PA once you include economic vacancy. 

Repairs are definetly too low. $1980 to mantain 5 units is a dream. Probably closer to $2500-$5000. 

How are the rents now? Can you raise them or are they near market already?

file:///C:/Users/jared/Downloads/5unitBVA20yr.pdf

Here's an update on the calcutlations for the property, I have updated it with all the best quotes for insurace, utilities, mortgage, etc.  There is a trash dumpster located on the property and I am able to just switch that contract directly over with the purchase of the building.

I had a loan secured for what I thought was 18 years and 5.05% interest but through miscommunication it was actually only a 15 year term, which affected my cash flow by $150 or so.  I'd rather have the higher interest rate and more cash in my pocket at this point being that it is my first purchase since I've gotten back into investing.

I will be taking care of the lawn care and snow removal as I am trying to mitigate costs for the first year until I am able to raise rent.  Even with a small rent increase in each unit, say $25/unit makes a nice addition in the cash flow category.

The previous owner has been meticulous in caring for the property and really there is nothing that needs to be addressed immediately.  I'm aware that things will come up and I have reserves for that until the building builds up its own reserves for that reason.

Thanks for everyones input and sorry it took so long to reply, I was vacationing in an area where service was hard to come by.

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