Help Me Analyze This Deal!

5 Replies

Thank you to anyone who looks at this deal!

Purchase Price: $600k

Units: 8 (2 quadplexes next to each other)

Current Rental Income: $6,915

Current Expenses - TOTAL $2,365.17

Taxes: $232.50

Insurance: $200

Gas & Electric (landlord paid for now): $571

Water & Sewer: $320

Trash: $41.67

Property Management: $1,000


The plan is for my partner and I to each purchase 1 of the quads ($300k each) with individual FHA 3.5% down loans. This would then take the deal to:

Rental Income: $5,396 (owner occupied)

Expenses - TOTAL $1,365.17 (now will be self managed)

Taxes: $232.50

Insurance: $200

Gas & Electric (landlord paid for now): $571

Water & Sewer: $320

Trash: $41.67

Debt Service - $3,315

Cash Flow - $716 while we are living there and increasing to $2230 after we move out.



The plan is to purchase the place under an LLC with 50% ownership of each with 2 separate loans on the properties. Let me know what you all think!

not sure if this one is a winner. Everyone's goals are different but for me I look to make at least $1000/month cash flow, after all expenses. One of the mistakes I made with my first rental was I didn't account for CAP EX and maintenance. Depending on the age of the building you should be putting aside at least 5% per month for CAP EX (roof, hVAC, hot water heaters etc) and about 3-5% per month for general maintenance (drywal dings, basic plumbing calls, etc) and i dont see where you've accounted for that.

Now you may be ok with low cash flow if this property is in a very desirable area and you're also playing for appreciation. I personally don't invest for appreciation as it makes you more susceptible to market fluctuations whereas, if you invest for strong cash flow (b,c,d area properties) even if the value of the property goes down during a market correction, you're still making money. Rents tend to stay strong even during a recession because folks downsizing from homes or more expensive rental properties will come to you, making your property in higher demand which alllows you to continue to charge market rents. Of course that's all very location based. just my $0.02

Originally posted by @Jordan Noble :

@Gaspare Urso sorry this is accounting for 10% combined for all of those. Sounds like I might need to bump that up?

Yes, from what the vets here are saying 20-23%. Of course this just a guide. 

 

@Wes Johnson thank you sir. I accounted for 10% total for vacancy, capex and maintenance. I am going to bump this up to 20% and assess my offer value. Luckily I have some insider knowledge that this off market deal they are going to try and close by the end of the year due to tax reasons of their sales planned for 2020. Gonna try and leverage that and reassess.

Also, with this being an opportunity to reduce my living expense from $1200/month to a free living with small cashflow and taking my commute from 40 min down to 9 min. I guess I should’ve included some of these aspects in my original as this deal is very specific to my situation.