Thursday, October 27, 2005

Out-of-state 4-plex

I was perusing the web and came across a 4-plex that may have potential. It's located out-of-state, so I'm treading in new water (on different levels). The list price is $33,900 and all units are currently occupied. I ran a monthly Net Operating Income assessment on the property, and this is what I cam up with:

Income
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Gross Monthly Rent: $ 770.00
Vacancy Factor: $ 64.17
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Gross Operating Income: $ 705.83

Expenses
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Management: $ 69.30
Maintenance: $ 38.50
Utilities: $ 0.00
Insurance: $ 14.13
Taxes: $ 42.38
HOA: $ 0.00
Other: $ 7.70
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Total Operating Expenses: $ 172.01

Net Operating Income: $ 533.84

If I can get a 30yr 100% loan @8% for the $33,900, I'll have a debt service of $225.54/mo. This will leave me with $308.30/mo pre-tax cashflow. Of course, there are a lot of unknowns yet in this scenario. First, I haven't found a concrete value for the property tax rate where this 4-plex is located. The best I could find online is an "average" of 1.5%. Second, I don't know if there are any repairs necessary or the condition of the property. I also don't know if the landlord is responsible for any/all of the utilities. Lastly, I guessing a 0.5% insurance rate, which may be too low.

1 comment:

Trisha#1 said...

Hey, Steve!

That list price seems mighty low compared to the net income. I would assume you will find there's lots of deferred maintenance. You might want to visit the property if you can.

There might even be deadbeat tenants in the place. You'll never know until you dig deeper! But, it's worth a shot! You could hook up with a local management company and go visit the place together.