It's not commercial...4-unit analysis...yikes..

Sharing a quick underwriting example from a recent 4-unit analysis. I applied my commercial minimums and pro-forma which I've been told not to speculate.... I’m not pursuing this deal, but it was a good exercise in how small pricing corrections and thoughtful financing structure can significantly change deal performance. The Seller will most likely NOT take my offer since she is making more monthly than what I would be paying her every month.

Seller Price: $245K
Assignment Fee: $10K
Total Price: $255K
Down Payment: $25K
Seller Financing: $230K at 3% interest-only

Current rents are $3,270/month. Using a 40% expense ratio, NOI is approximately $23,544/year, which puts the in-place cap rate around 9.2%.

With a very modest rent normalization of $250/month total ($62.50 per unit), NOI increases to roughly $26,544/year, resulting in a pro-forma cap rate of about 10.4%.

Under the interest-only structure, monthly debt service is about $575, and post-adjustment cash flow is roughly $1,600/month, with a DSCR near 3.8.

As the Seller would you accept this deal from me?

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