I came to this forum because of some of your articles. We are looking at a 4-unit rental (apartments) and trying to determine if it makes sense. Our philosophy is to lever the downpayment (presumably <25%) and generate decent positive cash flow.
The longer term idea is that the C/F would be a source of income when we retire – potentially in about 4-5 years.
I read about “NOI” but I can’t figure out the NOI on this property because I don’t know the period over which I should calculate NOI. Is NOI over the life of the mortgage (i.e. 30 years?). I can’t imagine it is just a single year’s income…?. What’s the time period to calculate NOI?
Below are some of the details. An opinion or feedback would be greatly appreciated.!.
Property is in San Diego county.
4-plex in a residential area – good midclass subdivision.
Few other rentals/apartments in the area – so limited rent competition.
Very good condition.
All units separately metered.
Separate garage per unit.
Close to schools and major freeway.
All units rented with long-term renters. Rent is low for the area – probably
because the renters have been there awhile.
Asking price is $700K – pretty firm. Priced to sell…
Total RENT/mo = $4375/mo plus $50/mo laundry.
General maintenance & pest control ~$200/mo
Property insurance ~$1600/yr
Property taxes ~$7200/yr ---- but would change based on our price
Assume 4.5% (is this realistic ??), 25% down === $2700/mo
We also have a difficult time guessing at the land value vs the building value. Here in CA land value is at a premium. However we suspect that for a 4-plex, the building value should be a larger percentage of the total value. We know this is important to calculate depreciation (for taxes) which should make the investment more interesting – but we can’t figure out how to guesstimate this with reasonable accuracy…?.
Can you tell us:
- do we have all the needed info to calculate NOI? What is it?
- what other info do we need to get?
- is depreciation a significant factor which we should further study?
- based on the above, what’s your guy on this investment?
Thank you very VERY much for any inputs and advice!!
“homebrew” in San Diego, CA.