Good evening all.
I am still learning and analyzing but want to get into MF units. One thing I am having a hard time with is ARV vs cap rate especially when financing is involved. I understand cap rate is NOI / purchase price and is used to compare properties. How do I go about finding the ARV though for refinancing after doing some repairs/updates? I'm sure it's a simple answer that I am overlooking.
On that note does anyone have any feedback about the below linked analysis? It's a 14-unit on the market for $500k. Report is based on purchase price of $450k. Expenses (electricity, garbag, water) are based on the T12 included in the listing. Now that I think of it I forgot to include landscaping costs. $181/mo per the T12.
*This link comes directly from our calculators, based on information input by the member who posted.
Hi @Brian Blatz, your expense estimates look a bit light. As this is a 14 unit, what kind of services does your PM provide? 8% - 11% is normal for SFH and small MFH. What is the cost of replacing a tenant? Normally, it's 1/2 first month's rent.
Also, how old are the major components (e.g., roof, hvac, electricity, parking lot)? If they're a bit older, you'll need to increase to capex reserves. Also, if/when you get it under contract, you'll need to determine which components need to be replaced immediately and increase your initial reserves (additional to your downpayment) to handle those issues.
Is the tax number based on the seller's information or based on the new price of $450k? Closing costs might be a bit higher as well.
Hi @Jovon Itwaru,
The taxes came from the county website. They have the appraised value of the property at $266,300. As far as your other questions; I just don't know at the moment. What is the cost of replacing a tenant? Is 1/2 a month's rent generally a good number to use? I am honestly guessing with the PM costs as I have no idea what the going rate is. What is a good number to use to plan?
Thanks for your insight.