Found the Right Property, Wrong Price

[Scott E.]

Hi

I'm hoping the pro's can help me to analyze this potential deal. I've been looking to invest in my first multi-family property for ~6 months now. The Phoenix market really seems to have dried up, but I still often find deals worth running the numbers on. The problem usually ends up being that the deals where the number work are located in war zones.

So here I am today. I finally found a great property in a great area. It is completely renovated, "turnkey" and fully occupied, which I think would be a nice touch for my first step into the multi-family world.

The problem lies in the numbers. I've run the 50% rule and the 2% rule and they just seem to be asking too much. My question is, what is a fair offer price for this property? Details to follow...

Asking Price: $275,000

Property Type: Multi Unit (4Plex)

Unit Mix: One 2br 1bth, Three 1br 1bth

Gross Monthly Rents: $2,200

Monthly Expenses:

$1,388 PITI ($1,052 annual taxes, $1,200 annual insurance)

$220 Property Management (Using 10%)

$200 Water/Sewer/Trash

$0 Landscape (Desert Lanscape, I can handle myself)

Total Monthly Expenses: $1,908

Monthly Cashflow: $292

I realize that I should be factoring in an additional 10% for repairs, and another 10% for vacancies. This ultimately eats up all cash flow.

My numbers are figured using conventional financing with a 20% down payment. Please help in determining a fair asking price for this complex, and also if there is anything that I may have missed in my analysis. This community is amazing! I've much more of a lurker than a poster, but I'm finally feeling prepared to get my feet wet and just need a little assistance.

Thank you ahead of time for your help.

-Scott

[Tracy Royce]

If the numbers aren't there, they're not there. Don't buy property that doesn't cash flow. BTW, you'll love my blog for BP this week (coming out in the next couple days)....it has everything to do with this exact subject here in Phx.

Keep grinding, happy hunting!