Buffalo, NY · Member since 2013 · 1 post · 0 votes
I'm in the process of closing on a 5 unit (4 unit 2 bdrm 1 unit 1 bdrm)
price is 199K
total income 33300 less 5% vac ~31635
total exp 14802
Taxes are 6890
Insurance 1250
Electric 600
Water 800
Mgt 1581
Maint 1581
Reserve 1250
Snow 400
Lawn 450
Annual payment to mortgage is 10.8K
I wanted to get others take on the numbers, i'm doing my due dillegence and background it is in an ok area middle to lower income right outside of buffalo, virtually no crime but incomes are a little lower in this area so i would class it in a B almost C neighborhood.
wanted to see what others take is on this is it a good deal? and am i missing something.
I know with the mortgage at the end of the day only leaves me to pocket 4K... could you give some insite to a new investor here. thanks
Albany, OR · Member since 2013 · 23 posts · 3 votes
13y
I feel like a broken record since my last post said the same thing :) you forgot to account for tax benefits, which will likely add to your bottom line as additional cash flow. You also didn't include annual equity gain, which should be separate, since it isn't liquid, but it's certainly value added.
I don't know the area so I can't tell you if it's a good deal, but you should revise your calculations to include the tax savings and equity gain. I personally avoid trying to guess appreciation value unless I'm certain the market is going up!
Easton, CT · Member since 2013 · 9 posts · 2 votes
13y
Hard to tell without knowing the age of the unit. Not sure if your numbers are all annual rates. Electric seems low unless you are including only common areas on a separate meter.
Management is usually 8 - 10% of gross, so it is about half of what it should be.
Maintenance is low too depending on age of units and mechanicals. Need to factor in long term maintenance like roofs, parking lots, furnaces, AC units and so forth unless you are intending to use reserves for this. How long will the roof, furnaces, etc. last until they need replacement? A new roof in the first few years will kill your income until your reserves can cover them.
5% vacancy is only one unit for 3 months. Don't know your market, but I estimate 1 month per unit on average in my area (some turn around in 30 - 90 days, others stay filled). Find out your vacancy rate for the area and base your estimate on the hight side of the range.
Without more information, I think at best your cashflow would be about half or less of what you think.