Seven Plex Analysis - My numbers are off?

Question

Okay guys,Looking at my second deal for a 7 Plex. I analyzed this property with the Rental analysis and I feel like my numbers are way off, so I want to see what you guys come up with.Specs:7 units with 1 vacant.

3,335 in gross rent with 6 currently

Property Tax : 3891

Insurance: 1656

Repairs/Main: 4190

Water: 3000

Dumpster: 1200

vacancy 10%

Cap Ex: $333 (too much?)

Asking Price : $425000 ( I think my offer should be 300,000 range based off of cap rate of 8.45 and noi of 18053)

Cap rate 8.45Thoughts?

Dylan Boesch · Answer

I am not sure what advice you are looking for but some really really quick ways to compare deals, in addition to cap rate, are to have an idea of a few different metrics that are typical for the location.

Price per unit (300k / 7 = $42k per unit. Is this typical in this location?)

Price per foot

GRM (gross rent multiple) so if the gross is 30k and you offer $300k then your GRM is 10x. Is 10x a typical grm for this property in this location?

these are just 3 quick ways in addition to cap rate to help you decide if you should analyze it further.

As for Cap Ex being too high, what is the condition of the property? juice that number up if the roof is more than 12-15 years old, same with the boiler/ hot water heaters if they are over 7-10 years old. Most other repairs are cosmetic.

Kurt Jones · Answer

Just looking at the numbers, if you finance it at ~5ish% on a 20 year amort schedule with 25% down, you're walking into a negative cashflow scenario. Granted you could rent the other unit and turn it around quickly, submeter the water (my favorite move) and you're looking at a different scenario.

I wouldn't be too jazzed about this deal unless you can get the down to that $300k range. Also, is that the owner's insurance rate? That would be a really good deal on a property insured for $400k in my geography.