Estimating 4-plex value and deal analysis

3 Replies

Newbie real estate investor in Las Vegas and first time posting. I am seeking out 4-plexes and found a property listed for $420K, monthly rent $3600. Net operating expenses about 12-14K. 3bd/1.5ba half a mile from an elementary/middle/high school so seems like it would attract long term family renters.

I've run the numbers several different ways and it looks like it will cash flow $600+ a month even in worst case scenario. I'm considering putting in an offer but I don't see a lot of other 3bd 4-plexes in the area selling (mostly 2bd). What is the best way to estimate what an appraisal will come back at? And does this sound like a good deal? Posting a copy of my purchasing terms sheet for feedback:

Hey Josh, i've analysed quite a few small MF properties in Vegas over the last two years, if you've read previous posts you will know most onvestors steer clear of the triplex / 4plexes that are for sale close to downtown and in the NE - which is where the majority of those properties for sale are located. You'll find plenty of the reasons for this general advise in other posts, so i wont get into that, but assume you have done your due diligence in terms of area / neighborhood, tenant pool and building classes etc.

 I dont know of too many 3bed units, this is what i would prefer over a 1 or 2 bed in general, but would depend on the individuals property. 

900/ unit sounds reasonable, but may not  leave much upside for future rent increases, depending on the property and its condition / location, a asking price of 420k suggests that its in one of the not-so-desireable areas, probably a C - Class? 

I think 3600/rents for a 400k plus 4plex is tight, but kind of the "norm" in Vegas is acceptable, it really highly depends on the property and location if i would ad it to my portfolio. 

What are your goals with this? long term hold? remodel and increase rents? what's the general location? (send a pm if you dont want to answer publicly) 

@Joshua P. , here's what I noticed:

  • Closing costs look very high. Typically 1/2 or 1/3 of that, but this varies depending on where you are.
  • What about CapEx? I usually figure ~15% when combined with repairs.
  • Insurance looks very low for a $450k property. Have you confirmed with a local insurance agent?
  • What about water/sewer? This is usually paid by the owner in MFR. Probably ~$160/month. Confirm with your local water authority.
  • Any landscaping costs?

My math puts you ~$340/month cash flow. Not great for a quadplex and only a 3% CoC ROI.

BTW, your NOI is incorrectly calculated on your spreadsheet. Debt service is not an operating expense.

My goal is long-term hold for cash-flow. C-class neighborhood. Newly (within 5yrs) renovated with one unit owner occupied. Leaves room for a low cost reno with potential for modest increase in rent in at least that one unit. 

Sewer/water is not included but I anticipate 100-150 based on similar quotes in the area. 

CapEx I anticipated in repairs under "contingency"

Insurance is based on the property's actual value, not the investment selling value from what it seems...same for property taxes-my estimate there is actually high. (this is where I have difficulty understanding the valuations)

I understand NOI doesn't include debt service, but I'm using this for an assessment as my personal investment not resale...I want to know what my take home is each month.

I calculate my ROI at 1-yr and 3-yr to determine if the investment seems reasonable. 10% is really my cutoff, which is why I would attempt to negotiate a lower cost by potentially offering to cover closing. I am probably estimating closing costs high for this reason.

I appreciate any further feedback, like I said this is all new stuff to me but I'm attempting to be diligent in my evaluation of each property considered