Residential To Commercial
Hi ALL
I've begun my plan I came up with which is basically owning 5-7 4 unit apartments (resi financing) for about 5 years. Taking all saved cashflow and combining with appreciation and 1031 into a large apt complex with a sales price of about 1.5mil.
The apt complex is my carrot I've dangled in front of me to keep me motivated. I've attempted to run numbers and diff. scenarios to see what kind of income I can expect from such a purchase. I've convinced myself I can achieve enough income (75k?) from this one apt. building to quit my day job. Basically retire and be an absentee owner.
Am I crazy to think this? How much realistically should I expect? I know each market is diff. and all but I plan on shooting for a 12% cap rate. Only problem is I don't know what commercial terms are (I think 15 years at ? rate). Also, I am trying to accumulate 400k in capital for this venture. 300k towards 20% down and 100k towards reserves & fee's & initial work. Does this sound correct?
Please help me understand this better. Thanks!!!
I think $75K is high. Not that it can't be done, but it's pretty agressive.
Assuming $300K down (25%) you'll be buying a 1.2M property.
Assuming a 10% cap, your NOI will be 120K per year.
Your debt service will be about $78K per year, which would leave you with about $42K per year to put in your pocket.
hibby - thats a 14% cash on cash return. Is that a normal return? that would would take almost 7 years to break even on the initial investment of 300K just looking at the cash flow. Whats a reasonable expectation on cash on cash return on an multifamily investment?
Thanks