Quick Analysis of Mutliple Duplexes?

3 Replies

What would you pay for 3 Duplexes (6 units) in what appears to be pretty good shape - fully rented w/ each unit bringing in $625 on average ($3750/mo)?

Property is also an hour away, which means that more than likely we'll have to use a property management firm to handle tenant issues and maintenance costs. I'm not sure what landscaping costs would be, but it's a very open/flat space that's about 1.5 acres of 99% grass. 

Brick duplexes all look to be in good condition w/ no deferred maintenance, on septic systems, tenants pay all utilities. 

Just ballparking it right now to see whether the asking price of $500k is fair or overpriced?

I wish I could find a property that wasn't section 8 that met the 1% rule. Here in NC, the market has been so hot, it's more like the .5% rule. Seller's already took an offer after saying we had until the end of the day to get other offers in - that was at about 3pm, so I'm guessing that means >= full price offer. Granted, the properties all looked to be in great condition. Brick duplexes, nice neighborhood, great schools. It's no wonder all the units were rented out. 

Still, the price was up there. $490k, and with the 6 units rented out it was generating $44.3k/year (or .9%) Debt service on that would have been $1775/mo + Taxes $250/mo + Insurance $150/mo = $2175/mo ($1520 cash flow)
Property Manager at 10% of rent = $370/mo ($1150/mo cash flow)
Landscaping = est. $300/mo ($850/mo cash flow)

That's before all other maintenance & cap exp. Rule of thumb says 50%  of rent(which takes the landscaping back off the table) - that'd be $1100/month, which likely means there's next to no cash flow on the property. 

But if that's the case, why was it on the market for less than 48 hours? NC is crazy. Finding any property at the moment is almost impossible. 

Price totally depends on the market and where the cap rates are at. Appreciation can drive cap rates down to the ground. Try moving around your LTV and check with multiple lenders to see if you can drive your cashflow up; if the property spent 48 hours on the market, comps probably support it which means the returns are there, you just need to make the numbers work. If multifamily properties are trading a 5 caps in NC, then $500k isn't unreasonable.