Here’s how I would judge it (assuming no utilities paid by owner).
Gross Income $2,950
Less Positive Cash Flow Needed $1,600 ($200/unit)
Less Maintenance $400
Less Vacancy $300
Less Insurance $125
Less Taxes $100
Equals $425 left for mortgage payment (P & I)
I’d offer $58,000 (30 yr, 8%)
Now you know why this property is being sold. If the owner has anywhere near $225K in this property, he’s losing his butt on it!
Mike
OK, hopefully this isn’t too stale of a topic, but there’s a nugget of information that I’ve been kind of looking for:
“Less Positive Cash Flow Needed $1,600 ($200/unit)”
Is that a reasonable goal–$200/unit (and one that all of you successful investors strive for)? I’m an engineer in real life and that’s the one piece of the equation that’s always been missing.
We have a two rental homes, and we’ve always gotten kind of close to that number, but it was probably dumb luck.
By the way I’m in Denver, and very few apt buildings seem to come close to getting you to $200/unit positive cash flow, at least not at the asking prices.
I’ll keep looking. Thanks for any feedback!
2bfree
I’m exactly in your situation. I hear cash flow per unit numbers from some of the pros on this board that blows my mind! Where I live there’s no way a sane person would sell a property with the cash flow that propertymanager is listing on this thread. Why would he? Really? If you had an 6 unit building that gave you $1200/mo after all expenses would you be selling it for $58,000? I know I won’t! In the market I’m in a building that brings in $2950/mo starts at $295,000.
I guess that’s the difference between pros and us amatures!