Hello to all my blog readers out there. Today I want to take a look at a
Chicago Multi-Family property that is currently on the market. This
property is near 35th and Western. It is listed by David Padgurskis, Showtime Realty.
I think that this property would make a nice addition to your portfolio.
But, we won’t know for sure until we run the numbers.
This 21 unit property is listed at $649,000. Each unit has 2 bedrooms and 1 bathroom.
It has been on the market for almost 9 months. The gross scheduled income is $126,600.
Let’s take a look at our key metrics:
Asking Price: $649,000
Gross Rent Income (GRI): $126,600
Gross Rent Multiplier (GRM): 5.13
Net Operating Income (NOI): $77,056
Cap Rate: 11.87%
Number of Units: 21
Price per unit: $30,905
Price per square foot: $30.23
Year Built: 1910
Vacancy and Collections (5%)________$6,330
Landscaping & Snow Removal_______$1,800
Property Management (5%)________$6,330
Total Expenses: $49,544
Based on my estimates, the expenses are running
at about 39% of gross rental income or $49,544.
This will give us a net operating income of $77,056.
When we divide the Net Operating Income by the asking price of $649,000,
we find that we have a cap rate of 11.87%.
If we adjust the purchase price down to an even $640,000 we have an
attractive cap rate of 12%!
As you can see, the purchase price and the cap rate are inversely related.
If you want a higher cap rate, then you need to offer less for the property.
After you purchase the property, if you want to increase the cap rate, then
you need to increase the Net Operating Income. This can be done by
raising the rents, increasing non-rental income (i.e. vending machines, coin laundry, etc.),
or by reducing the expenses (improve collections, fix leaky faucets, etc.).
Another thing that makes this deal look interesting is that the owner is willing
to “hold paper”. So you might be able to get this one financed with only 15% down.
This will definitely increase your cash-on-cash returns.
So at a 12% cap rate, I definitely think this property warrants further investigation.
As a buyer’s broker, I can assist you with purchasing this property or any
other multi-family property that is listed on the Chicago MLS. I am licensed to sell
real estate in the state of Illinois. Just send me your search parameters and I can
send you properties that meet your acquisition criteria.
Until the next time,
Real Estate Broker
Century 21 Affiliated
5200 S. Harper Ave
Chicago, IL 60615
24 Hour Voice Mail: 312-242-1822
Send me a note!
Visit me online: www.773property.com