Multifamily Building Case Study

Garrett case study 0 Comments

Address

1823 SE Morrison St. Portland, OR 97214

 

Neighborhood

Arguably one of Portland’s best interior neighborhoods, Belmont is as walkable as any and rental demand is always high.   The coffee shops, eateries, and retail businesses all in a few blocks in any direction are great for the Portlandia consumer/renter that will pay top dollar to live here. It’s less than a five minute drive or the same by bike to downtown, and is on several buslines directly in front too.  .

Financials by Unit

Units one and two of the fourplex are in need of a remodel to get the best return on your investment dollar. There is no need to move structural walls, simply new cabinets, flooring, paint, and fixtures.   The other two units are turn-key ready right now. They are original charm and the only thing to upgrade would just be the appliances, if you so desire.

The current rent per month is listed below:

  • Unit 1  –  $995
  • Unit 2  – $960
  • Unit 3  – $1,050
  • Unit 4  – $950

Future rent per month after “remodel”:

  • Unit 1  – $1,295
  • Unit 2  – $995
  • Unit 3  – $1,195
  • Unit 4  – $1,250

In my opinion, it will cost $20,000 for the remodeling needed to get the rental prices listed above on the right.

Building

-We believe the roof needs to be replaced and in preliminary conversations with the owner they would pay for a new roof as part of the sale.

-Common area basement with separate storage unit configuration.   It is underutilized and could be squared off for each unit to have their own storage unit.

Financing and Cash Flow

The current 30 year interest rates are about 4.5% with the required 25% down payment for multifamily units.

  • Current rent – $3,955
  • Debt – $2,280
  • Tax & insurance – $   666
  • Net op exp – $   300
  • Net op income – $   709
  • Market rent – $4,735
  • Debt – $2,280
  • Tax & insurance – $   666
  • Net op exp – $   300
  • Net op income – $1,489

The above assumptions assume 75% LTV so mortgage would be $450,000, 4.5% interest rate.  Also, net op exp is predicted to be $75 per month which covers water/sewer/garbage and misc grounds upkeep.  Use these only as assumptions, not a guarantee until further due diligence is conducted if an offer is written.

Conclusion

 

25% downpayment is $150,000.  $20,000 to improve/remodel.  Closing costs, approx.. $10,000.  All in predicted at $180k.  On new rents above, cash on cash is 9.92%.   There is always additional outlays from time to time, energy to manage, repairs needed, which will lower the cash flow, but rents can also go up over time too……….

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