Multi-Family Help me analyze this deal

5 Replies

@Rosemarie Tolliver , based on my calculations, you'll cash flow ~$135/month. That's not good.

A few things about your analysis:

  • What's the deal with the $900/month water bill? That's VERY high. I'd expect it to be half that or less. Have you confirmed the costs with the city? This could be an opportunity to reduce costs and add value. You'll add almost $70k of value (assuming 8% cap rate), if you can cut that bill in half.
  • Is there a house electric bill, for hallway lights, etc.? I see an eleventh meter in the listing photos.
  • Your closing costs will probably be 2X what you have there.
  • Pest control for $5/month? What does that get you? I wouldn't trust that number. Better call a few places for quotes.
  • What about lawn care?
  • You have 16% combined for repairs, CapEx, and "supplies." I think this is probably fine.
  • You're not accounting for vacancy, though. That's probably ~8%.
  • Have you received a quote from a local insurance agent? $400/month for a $200k property sounds high.
  • What's the deal with the monthly plumbing expense?

What are the opportunities to bump rents? What's the local cap rate? 8% looks low considering the property, a portfolio listed by the same agent is listed at 13%. If 13% is closer to reality, this place is only worth ~$125k, assuming your numbers above are correct.

Thank you for the questions and feedback @Jaysen Medhurst, I really appreciate it! You're right, if I was pursuing this one further I would definitely need to do some additional investigation and number crunching. I'm not sure it's worth  spending anymore of my time on it at this point.