Maine Multi Unit Investment Real Estate (Part 3 of 3)
Posted on February 26, 2007
The Numbers, its that simple!
A sample balance sheet for a 3 unit complex
Purchase Price: 300K
Down Payment: 60K 20%
Income:
Rents 800
1000
1100
coin op laundry 150
Rental Income $3050 (Monthly)
Minus Vacancy/Reserve (10%) -$350
GROSS RENTAL INCOME $2700
yearly $32,400
Expenses
Water/Sewer $2000
Common Electric $300
Heat $3000
Maintenance $1000
Property Taxes $2500
Insurance $1000
Total Expenses: $9800
Net Operating Income: $22,600
Debt Service:
7% 30 year loan: $19,160 ($1600 month)
Cash Flow Yearly $3,440
What does this all mean? Well the building would make you approximately $250 plus a month after all expenses, factoring a healthy vacancy rate and assuming you are putting down 20% of the purchase price. Is this a good investment? The key ratio to look at is the Cash Flow divided by the down payment (your equity) which in this example yields a 5.7% figure, meaning that your money invested is earning a rate of return of 5.7%, better than what your bank will offer, but worth all the headaches of managing the building? With that said, investing in the right markets for an extended period of time will more than likely give you some appreciation not to mention the the beneficial tax depreciation one will realize while also looking for ways to boost income while reducing expenses can siginficantly sweeten the deal. For example if one transferred the heat cost on to the tenant, cash flow would double as would your ROE to 12%. Thanks for reading…
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