All Forum Posts by: John Cook
John Cook has started 2 posts and replied 3 times.
Post: 4 Unit Apartment Complex Rental Analysis in Northern California
- Los Angeles, CA
- Posts 3
- Votes 1
Thank you everyone for taking the time to reply to this - i've revised my cash flow estimate to better reflect additional expenses (utilities), a 10% vacancy rate, and property management fee of $295 monthly. This yields FCFBT of $485 monthly, much lower than my original estimate. This now seems like an expensive investment to generate just $400-500 of free cash flow.
Please see below
@Wei Xie if I estimate gross rent to be $4000/monthly (4 units, @$1000USD) and allocate 15% for operating expense related repairs, this results at a reserve of $600 monthly. What is your thought on % allocation for apartment complexes?
@Steve Bracero The building was bought buy an investor for ~$210KUSD July 2016, It was not in an habitable condition. His firm rehabbed it and it is now on the market for $389K. Thank you for your feedback regarding water. In Sacramento, landlord pays water - i have revised that in my estimate.
@Ravi Rada - thank you Ravi, i've revised the cash flow statement to include vacancy loss and utilities
@Catherine German - It is in Sacramento CA. Can you please elaborate more on apartment complexes w/in housing communities vs. apartment communities. Does the data actually suggest an identical apartment in a housing community will yield higher rental income?
@Jackson Carr - it is in Sacramento CA. Thank you, after revising the cash flow statement - FCFBT is lower. I've included it below for your review
Parameters:
| Federal Tax Rate | 33% |
| Vacancy Loss Rate | 10% |
| Repair Witholding | 15% |
| Down Payment | $ 13,615.00 |
| Asking Price | $ 389,000.00 |
| Amount Financed | $ 375,385.00 |
| Monthly Bank Note | $ 1,763.00 |
| Annual Property Tax | $ 3,696.00 |
| Home Owners Insurance | $ 1,164.00 |
| Annual Property Management Fee | $ 3,540.00 |
| Estimated Interest Expense | $ 14,400.00 |
| Monthly Water/Sewer/Garbage | $ 100.00 |
| Asking Rent | $ 1,000.00 |
Output:
| Occupancy | ||
| Rental Income | $4,000.00 | |
| Gross Rent - Annual | $48,000.00 | |
| Expenses | Total Vacancy Loss - Monthly | $ 400.00 |
| Repair Holdings - Monthly | $600.00 | |
| Management Fee - Monthly | $295.00 | |
| Property Insurance - Monthly | $ 97.00 | |
| Utilities - Monthly | $360.00 | |
| Total Monthly Operating Expense (Sum of Expenses) | $1,352.00 | |
| Total Annual Operating Expense | $16,224.00 | |
| Net Operating Income - Monthly (Gross Rent - Sum of Expenses - Vacancy | $2,248.00 | |
| Net Operating Income - Yearly | $26,976.00 | |
| FINANCING & OTHER EXPENSES | ||
| Bank Note - Monthly | $ 1,763.00 | |
| Cap Expenditures | ||
| Total Financing Expenses - Monthly | $ 1,763.00 | |
| Total Financing Expenses - Annual | $ 21,156.00 | |
| Free Cash Flow Before Tax - Monthly | $485.00 | |
| Free Cash Flow Before Tax - Annual | $5,820.00 | |
| TAXES | ||
| Depreciation | $14,145.45 | |
| Property Tax | $308.00 | |
| Mortgage Interest Deductions | $ 14,400.00 | |
| Taxble Income | -$1,877.45 | |
| Tax Liability (Savings) | -$619.56 | |
| Free Cash Flow After Tax - Annual | $6,439.56 | |
| ROI | ||
| C/C Return | 42.75% | |
| Cap Rate | 6.93% | |
| Desired Cap Rate | 10.00% | |
| Gross Rent Multplier | 7.82 | |
| Valuation | ||
| Valuation | ||
Post: Estimating Water Sewer Garbage
- Los Angeles, CA
- Posts 3
- Votes 1
Happy holidays everyone! I'm curious to know if anyone has a method of estimating water/sewer/garbage for 2 bed/1 bath apartments. It appears that Sacramento is a "landlord pays water/sewer/garbage" city so if any landlords can share their tips on estimating this expense, especially when determining cash flow for potential investment properties, it would be most appreciated. Does anyone actually look up historical expenses per unit? is this possible?
Post: 4 Unit Apartment Complex Rental Analysis in Northern California
- Los Angeles, CA
- Posts 3
- Votes 1
Long time listener of BiggerPockets - finally decided to take the plunge and ask for feedback & analysis on the transaction below. Numbers are pro-forma done by me. Property is a 4 unit 2 bed/1 bathapartment complex in northern california. I want to preface this analysis by saying the entire building is vacant. Which is why i'm hesitant.
This is a flip from an investment firm which rebuild the complex. It's on a street lined with about 16 other similar shaped apartment complexes and it is by far the best looking/cleanest.
Area - working class, across the street from a park, walking distance to a mall, across the street from an elementary school
Asking price: $389K
My area analysis concludes that I can charge $1000-$1150. Numbers below are $1000USD
Operating Expenses:
1) Repair allocation 15% of gross rent - $600
2) Property Management Firm - $150
3) Insurance - $97
Monthly NOI - $3153
Annual NOI - $37836
Financing:
1) Bank Note - $1763
Cash Flow:
Free Cash Flow Before Tax Monthly - $1390
Free Cash Flow Before Tax Annual - $16690
ROI:
Cash on Cash Return - 122.51%
Cap Rate - 9.73%
GCM - 7.82
I feel like these numbers are a little nebulous because the unit sits unoccupied as a result of the rehab. Just curious to get other people's opinion on this? P.S. I've reviewed over 50 properties in this area and I can't find a single one that hits the 2% rule on gross income, this one barely clears 1% - any thoughts?