How To Analyze A Multifamily Home Real Estate Deal & Present It To An Investor

July 22nd, 2022

One of the solutions that we provide is affordable housing, but that doesn't necessarily mean that it’s centered around low income.

Instead, it means that the property is made affordable to live in.

Someone may want to live in a half-million dollar property. However, just because they want to live there doesn't mean they have access to – let alone possess – a half million dollars.

But one day Mr. Investor comes along, plunks down the half million dollars, and has the ability to stay here. Thus making housing affordable.

Let’s take a look at a real-world example of a multifamily home deal that was presented to me recently.

How You Can Find A Way To Live In A Half Million Dollar Home Without The Cash To Invest

There was a four-plex that was up for sale for $400,000 in Coral Gables, FL… and a person I knew was looking to purchase it at that cost. Here are the particulars:

The Details Of The Deal

This building had 8 bedrooms and 6 bathrooms.

It was in good condition, located near the center of Miami, FL and close to downtown. It was close to the airport and major expressways.

Each of the units has new kitchens, new bathrooms, and new AC.

The gross rent from 2 bedroom/1 bathroom units in the area is $1,920 per month.

The gross rent from 2 bedroom/2 bathroom units is $2,200 per month.

Plus – there is laundry room income (let’s estimate $100 revenue per month), and a monthly charge of $30 per pet.

PRO TIP: There are a lot of tenants out there with pets. Instead of taking a higher security deposit – a security deposit shows up as a liability on your balance sheet that you must protect and control – you can charge $30 per month as income. Because it’s income, you get to take that money and use it any way you like.

Let’s Figure Out The Math Behind The Details

The gross income for the entire property is $14,220 per month.

Multiply that by 12 to get the yearly income and you get $50,640.

Apply the 50% expense ratio and that gives you $25,320 going to expenses.

Once again – we apply the 50% rule and we have $12,660 as a total return on investment for your investor.

Now here's the thing… If you're going to raise private capital for this particular transaction, understand that you have $12,660 per month which you can give away.

How To Position This As A Good Investment For An Investor

So in this case, $400,000 is the number needed to purchase the property and – based on the month – we are able to give a yearly return of $12,660 for the $400,000.

It's going to give your investor a 3.17% rate of return.

Now some of you might say that's too low. And you know what – it all depends on your investor identity.

For example, when you look at websites such as bankrate.com, you’ll see a five year Certificate of Deposit (CD) at 1.5%. Furthermore, that CD is technically unsecured – or secured by the full faith and credit of the bank and FDIC.

So depending on how much you trust those two entities, the investor potentially has 1.5% coming in every year.

Or the investor can be a part of this deal and get 3.17% return.

Depending on how the investor stores their money – and the liability they want to incur – a return of 3.17% as opposed to 1.5% doesn’t look too bad.

There are many ways to position this once you've run the numbers to figure out how things are going to work.

And again… it's down to your investors.

If you find the right person who has a CD – knock yourself out, have fun. And you could be able to make a decent amount of cash for everybody involved.

Want to learn how to master short-term real estate investment deals in no time? Register for my FREE Short Term Rental Blueprint Video Course today!

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