My first deal a Multifamily 6 unit

9 Replies

my friend wants me to invest together with him in a multifamily 6 unit building, 

is it a good deal?

income 

Unit 1 $1,400

Unit 2 $1,100

Unit 3 $1,100

Unit 4 $900

Unit 5 vacant

Unit 6 Vacant

Parking $200

Total Income as of today is $4,700 a month, with the other 2 vacant apartments renting for $1,100 each it will be a total income a month $6,900

(he claims that he can get from all apartments at least $1,500 a month)

taxes is about $10,000 a year

Purchase price is $670,000.00

is it a good deal? It's my first deal and I don't want to mess it up on my first deal

its in Elizabeth NJ 

should I do it?

@Menachem Bloom Glad to Here fellow BP looking into deals. So I am new to investing. These our my thoughts. There is a lot of more information needed example all operating cost example insurance,utilities,vacancy, repairs to name a few. Did the owner provide rent roll and expense report ? What is your financing strategy ? 25% down,BRRRR, owner financing just to name a few. So there is more information needed to give an educated opinion. Let me if there is anything I can do to help remember I am a new investor too lol.

@Menachem Bloom it depends on if the building is registered with rent control or not.  if it is registered, the units already have a rent amount on file and you cannot jack it up with a new tenant unless renovations are made. usually you wont have a problem with a brand new tenant especially if you are at market rent.  how many bedrooms are the units?

Hey @Menachem Bloom I am also in Elizabeth and the first thing that caught my eye is the $10,000 in taxes. For a six-unit. That's incredible in this area. Most duplexes are $12,000+, so I imagine that building is under some type of either rent control or other program.

My two cents, as far as analyzing the numbers, never base anything off of what you "can get." Always run worst case scenario and go from there. That said, depending on the unit, building, and neighborhood, $1,500 sounds achievable, especially with parking. I see 3-bedrooms going from $1,400 to $2,400, so that would not be a stretch.

Hard to truly analyze a deal without seeing the full picture of the financials.  A good rule of thumb is to include a 50% expense ratio.  That 50% encapsulates all expenses aside from debt service.  I would also underwrite a 5-10% vacancy rate (even if it is 100% occupied).  You want to be conservative in your deal analysis.  If the numbers work with those rules of thumb, you usually have a good deal.