First multi-unit deal -- over $600,000 Help!!! - Posted by Gary

Posted by Gary on February 27, 2001 at 21:31:08:

First, look at your cap rate (net operating income divided by asking price of property)- it’s about 11% and that is not high enough for all these properties and the time it will require in terms of dealing with turnover, maint., etc…you need at least 13% or higher. That means a reduction in asking price by 15-20%. I would go for this if rents are current, big ticket maint. problems are manageable (furnaces, roofs, siding)and you have a good reserve built in your expenses for these, owner would hold second at reasonable rate (9-10%) and there is potential to raise rents. How much is owner holding in security deposits? can you use this as downpayment? This will only work if units are easily rented and your security deposits coming in can pay for the deposits of the tenants leaving; need to check on state laws, too, as some require deposits to be held in separate escrow account…this is a big one that needs much thought. Can you buy just a few of the properties, the ones with the best cap rate and the lowest vacancy rates?

First multi-unit deal – over $600,000 Help!!! - Posted by Gary

Posted by Gary on February 27, 2001 at 21:07:39:

22 Units: All quadplexes: Different locations, same city. All units are rented.

Units Monthly Income Asking Price
x4 2260 220,000
x5 1300 75,000
x5 1475 127,000
x8 3195 260,000

Total 8230 682,000

Approx. Gross Operating income: 94,139
Approx. Gross Operating expenses: 19,152
Amount left for debt servicing/net operating income: 74,987

Operating expenses including: real estate taxes, general maint., advertising, insurance, lawn care, 2% vacany rate, and utilities, some property management.

Seller states, “All asking prices are negotiable. Will entertain crative financing ideas. Will hold second notes or help with down payment”

I have A-1 credit “700-710” scores. I own two rental units with approximately $20,000 in equity (purchased in December and January). I have about $10,000 in available credit cards and approximately $3,000 in cash.


Re: First multi-unit deal – over $600,000 Help!!! - Posted by Jason Feldstein

Posted by Jason Feldstein on February 28, 2001 at 20:00:29:

The expenses are not realistic. Look at them closer.