Multi- units can make you money
I know some of the gurus give you complicated formulas and spreadsheets to analyze income properties. As you know, the value of an income property is in its income. Comps are useless. You have to know what market rents are, the approximate age and condition of the property and who pay utilities.
Don’t believe one word the seller or realtor tells you about expenses. You will verify everything during the due diligence period but here’s a quick way to estimate if this property is worth going after.
1. Start with potential gross income
2. Depending on the age of the property and the condition, your expenses will be between 25 and 50% of that despite what the owner or the realtor says.
3. Subtract that amount from the total rent
4. Now decide how much money you want monthly to make it worth your while-
5. The amount left is the amount the property can afford to pay in mtg cost
6. Go into a financial calculator and see (based on current expected int rate) what that number is.
7. Add 25% for the down payment and that is the mao. (maximum allowed offer)
8. You can also add up all the money you have to invest and what the annual rent is to see what your return on your investment would be.
OTHER QUESTIONS TO ASK:
1.You should also ask if each unit has its own utilities.
2. what is the mix of units
3. Do the tenants have leases
4. what is the vacancy rate
5. Are there any repairs that have to be done
.6. how old is the building and how old is the roof.
7. when was the last time the units were remodeled
