Need Help With 4-plex Offer

Comments(12)

• 
  jfmlv195016th February, 2008

  Vacancy 5%?????????
  
  There are only 4 units so if 1 is vacant then 25%, if 2 units vacant then 50% etc.
  
  John (LV)

• 
  Taxivestor16th February, 2008

  jfmlv:.......
  
  In figuring vacancy would it not be more accurate to figure on an annual basis? E.g., 4 units times 12 months = 48 unit-months. The vacancy rate would then be about 4-5% if a unit were vacant for two months.[ Edited by Taxivestor on Date 02/16/2008 ]

• 
  d_random17th February, 2008

  rglover548, could I find out the cap rate from a realtor?

• 
  cjmazur18th February, 2008

  3% down is pretty aggressive.
  
  Look at how many people in the last couple year have gotten into trouble from high LTV loan.
  
  Can you get this rate 97% LTV at 6%?
  
  Can you really get the rent you estimate. I find verifying the number on MF deals one of the most challenging tasks.
  
  Do you have access to historical financials?
  
  Is there a ton of deferred maintenance?

• 
  jfmlv195018th February, 2008

  Additionally, since he says that this will be an owner occupied property based upon the loan he said he was getting, the unit he is living in would probably not be an income producing unit.
  
  So now we have a minimum of 25% vacancy rate plus any other unit that is actually vacant for however long.
  
  John (LV)

• 
  rglover54818th February, 2008

  "rglover548, could I find out the cap rate from a realtor?"
  
  Probably not...unless they are commercial. For N. Carolina, i would guess 9% would be a good target. New Orleans is about 9%; Los Angeles is about 3% or worse.
  
  If you need to ask how to calculate the CAP... then its probably not a good factor for u to use. good luck

• 
  d_random18th February, 2008

  Thanks for the help rglover.
  
  With $3600 in annual maintenance, I would have to offer $240K to get :
  
  9.09% CAP
  5,064 annual cashflow
  32.88 cash-on-cash return
  1.30 Debt service coverage ratio

• 
  rglover54822nd February, 2008

  $5000 cashflow is around $400/mo...thats not to bad. $300/mo maintenance is a conservative estimate, some months you wont need to repair anything...and then boom...$500 a/c problem. $300.00 is a very good and verified estimate for a 4-plex.
  
  240k offer is not bad if 2bd/ houses/townhouses are selling for over $75k in that area. But shoot for $200k or less.
  
  Of course, if you are in a position where the seller can call some shots or you need loan/repair assisstance...negotiate!

• 
  cjmazur23rd February, 2008

  d_random:
  
  Yes sched E.

• 
  edmeyer23rd February, 2008

  donny
  
  You might want to take a very close look at maintenance costs, as well as, turnover rates. In my opinion the largest uncertainty is in maintenance costs. They can vary widely. Related to this is turnover rate. Make ready costs can run up maintenance.

• 
  jerlaff623rd February, 2008

  What lender are you using? I would like to find out who they are because they are more attractive than the lender I am currently using. If you could PM me that would be great!
  
  Thanks,
  Jeremy

• 
  d_random24th February, 2008

  Chris, you are a braver man than I.