Please verify my math, am I flowing $1k/ month?

Hi folks,

I found a multi unit: 119,000

two 2 bdrm apts $800 each… two 1 bdrm apts $650 each

vacancy factor assumed @ 90 days (not so great neighborhood)

taxes - unknown … ins - unknown (higher on multi unit?)

maintenance -

so here are my estimates: mortg w/ HML @ 11% = 1,000

taxes @ 1800 = 150/ mo

maint @ 7% = 70/mo

“mgmt” (me) @ 7% = 70/ mo

ins @ 1800 a yr. = 150/mo

totals 1440 - rounded up for cushion to 1500

2900 rents

  • listed expeses 1500

1400 cash flow each month?

please insert anything i’ve missed. i’m about to faint. now, if i can only find someone to do this deal for me…

Hi Realnew,

Who’s paying utilities? What is the cost per unit for the area on this type of property? (Your fourplex is listed for $119,000, divided by 4 = $29,750 per unit)

Vacancy is usually stated as a percentage. What is the percentage for your area? Google info for your area.

What is the condition of the primary systems of the property (any major work required right away: roof, plumbing, electrical, structural, etc.)?

And sometimes the ‘not so great’ neighborhoods are good buys if you have the courage to manage or hire an outside company who has the courage.

Cate

Excellent questions. I just found this property today. I’ll have to dig.

Digging is good. Also, I would try to at least get by the property, see it and walk around the entire property. I would look at everything (not in windows of course) but everything else I could. If I were to see anyone, a tenant or a neighbor, I would ask them about the property and the neighborhood.

Then I would drive the neighborhood, and take down info of anything else for sale or rent. I’d call and ask questions of anyone who would talk to me. You want to learn all you can about your property and its neighborhood before making any decisions.

Cate

realnew…

You have a couple of anomalies in your methodology…vacancy is expressed as a percentage. In your math the vacancy rate you are using is at 6% and is probably low for an older building…I would use 10-12%. It (and management) are a percentage of the gross rents, not of the mortgage amounts. As for maintenance, I use $50 a month per unit – it is relatively safe (but on the conservative side).

Here’s what I would get with your numbers:

Income (@100% occupancy): $2,900

Outgo:
P&I ($119K @ 11% for 30 years): $1,133 (OUCH!!)
Taxes: 150
Insurance: 150
Management (7%): 203
Vacancy (10%): 290
Maintenance: 200

Total $2,126

Cashflow: $774.00 ($193.50 per unit)

I would do this deal if everything else checks out…looks like a solid deal.

Keith

Hi Again,

Well, I did some digging. The vacancy factor is currently listed at 100%. I take it this means it’s not rented. I’m happy to cushion my estimates $100 per rental on maint., vacancy @ 20% . It would still cash flow. I have a call in on the major systems, utilities etc. The cost per unit is competitive.

p.s. I would refi the HML to lower the payment. I simply don’t have the means today to secure this property. I saw the HML as a way in, then to refi.

<<p.s. I would refi the HML to lower the payment. I simply don’t have the means today to secure this property. I saw the HML as a way in, then to refi. >>

Yes, I know…I’ve been following your “trek”…

Still, you might want to consider partnering with another investor in your area…“half a loaf is better than none”.

Keith

lol, thank you, keith. that makes me feel warm and cozy.

conversely, I found a great home for my residence. the schools are not so great. :frowning: divorce stinks.

Can’t you replace this loan thru the Hard Money Lender (at 11%) with 100% financing thru a regular lender? The best rates I’ve seen apply to 80/20 mortgageswith a combination of 6.625%/10.1%. Doing the math on a loan of 119k creates a 30 year mortgage of $820.20 per month, so this would bring your cash flow up by almost $200 per month! :slight_smile: :slight_smile: