4-Plex for sale $640k 8% cap rate... have I entered the Fastlane?
Updated above post as a screenshot of my working excel valuation. Feel free to leave your thoughts and concerns. I will be borrowing from the bank with a 20% downpayment at an interest rate around 3% or better.
Please vote at the top!
eribruski said: ↑
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Purchase includes full tenancy - 4 x 1 year lease
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You're not including property tax. Most places do have property taxes. I just looked up property taxes in Toronto and it goes as high at 1.7% for multi-residential? Also there are other hidden expenses that add up. For example if a tenant has black mold they can sue in the US and most insurance policies don't cover it. Maint., legal, and repairs all for $2,469 is too low for 4 units. How did you come up with that? How did you come up with a 95% occupancy rate? 95% is the high end for big apartment complexes.
Thank you for your feedback. We have tenancy agencies that easily connect renters with landlords. I'm sure you are familiar, they charge a management fee of 5% and take care of the legal aspects up to litigation. The building was fully renovated 4 months ago, pictures look great. If we consider I will be inspecting the property on Monday and getting all the small details such as property tax.
The numbers were provided by the seller from 1 year of operation. I still have to do my due diligence
Several things to consider...
Looks like you are buying retail at full price. This will limit possibility of appreciation unless your area experiences a boom of employment or similar.
How does this property compare to competition?
Your maintenance costs will increase each year. If the place was just renovated you have about a 5 year honeymoon of low repairs, then things begin to break.
A mad/dirty/negligent tenant can cause a lot of damage. You have to have good contractors ready to jump in and get your apartments ready to rent.
What is normal vacancy rate in your area?
Are any of the renters related to or beholding to the current owner? Under the table back door agreements can result in immediate vacancies after closing.
Those are great questions, and I agree, the property is a bit pricey but it appears to be in pristine condition. As we fall into another recession, housing prices will probably not appreciate, but we expect a small but decent return to carry into a better property in 3-4 years time
My business partner owns a GC company so our prices for construction related issues do not include mark up.
This deal just passed by us today - we are considering other deals 1/3rd of the price of this one - I do not have full disclosure of this property present day