35% for expenses is extremely hard to find. I’ve done 2000 authentic underwriting on deals in the last 2yrs and I’ve not seen 35% expense yet, the lowest I’ve seen was 44.7% Now that Mr. Peter said it, I’m 1000% motivated to look for one, thanks for the motivation
Great video! Clear, precise & to the point! For the COCR calculation, if the building is a value add I'm assuming we'd add deferred maintenance or CAPEX in with the down payment?
As soon as I saw that the asking price was $1 million and you were collecting $1,000 per unit on a 12 unit building I knew this was going to be a 'go'. This feel like a property in a C class area. I'm sure there's a easy to make spreadsheet that helps do this even quicker, and that spreadsheet could be used to help turn a no-go deal into a go by making changes to what you are willing to pay. Every deal's a potentially good deal at a certain price point.
Hi There, Its a pretty intensive calculation, but there are tons of free tools online that can help you calculate this. Just google your question and some should pop up :)
I think it’s because he didn’t show the adjustments for the arm rates . Eg months before first adjustments ,months between adjustments and maximum interest rate cap .this will through off the monthly payment buy a few hundred dollars
Great video. Simple explanation. It's probably important for everyone to look at their individual market and cater their numbers toward that. I'm interested to see what a deal would need to look like using a 3.5% down fha loan and what would make such a deal a "go". Thanks for the video
Thank you very much Mr. Harris you wrote the note for teaching others on the board - this reminds me when I was learning best in my high school time wow it’s so awesome to learn & understand. Following to learn more 😃👍💕
Love your videos. Is it fair to assume the 35% rule for Opex does not include Property mgmt cost and reserves for repair and capital expenditures? With Prop Mgmt (i.e.10%) and these reserves, would you agree that the baseline would then be closer to 60%?
Why short the process timing when it still took 5 min to get the metrics etc? To be able to do all of that in 10-15 min is still good when it comes to commercial property investing. 😎 thanks again
If it sounds good after 5 minutes, then dig in deeper. You can always spend more time evaluating a deal but if it doesn't have some merit in the first 5 minutes, it rarely gets better the longer you investigate.
A very helpful training on understanding the relationship between cash flow and cash on cash return is here: www.commercialpropertyadvisors.com/commercial-real-estate-terms/
Hmm...I wonder if I would be considered a mentor? I show people a turnkey multifamily investment opportunity and give them all the information they need to make the most informed decision possible. However, I only work with the one opportunity. Would that count do you think?
The expenses rule of thumb is getting a lot of feedback on this video. Some argue that the 35% rule is best applied to under 10 units. Whereas above 10 units, 40-45%. For this video, I was trying to keep it simple. Lending underwriters use 35% as their rule of thumb.
Doesn't your book say that 50% is the average for expenses? Aren't most banks requiring 30-35% down on these types deals. And isn't debt closer to 7,5%? These changes make a big difference in the underwriting and render this not such a good deal. Expenses are go mg up not down. Pencils down?
The expenses rule of thumb is getting a lot of feedback on this video. Some argue that the 35% rule is best applied to under 10 units. Whereas above 10 units, 40-45%. For this video, I was trying to keep it simple. Lending underwriters use 35% as their rule of thumb.
The expenses rule of thumb is getting a lot of feedback on this video. Some argue that the 35% rule is best applied to under 10 units. Whereas above 10 units, 40-45%. For this video, I was trying to keep it simple. Lending underwriters use 35% as their rule of thumb.
I think the annual debt service calculation may be off. Monthly payment = $4,062/month ($48,744 annually). I based this off $750,000 loan, 6.5%, 25y Amortization
Probably didn't clear his calculator but the basic principle still applies, cash flow around 24k instead of 28k. Still about 9% return on your money vs bank at about 5% there are other advantages like tax depreciation, and equity growth, looks like a solid deal, but if you had a hard money loan at 10% for down payment it would be negative so it's not a start with no money deal.
![ARGENTINA vs. PERÚ [1-0] | RESUMEN | ELIMINATORIAS SUDAMERICANAS | FECHA 12](http://i.ytimg.com/vi/xtI25ENDDSY/mqdefault.jpg)
Every successful multifamily investor has a mentor. Get your mentor here: www.commercialpropertyadvisors.com/protege-program/
35% for expenses is extremely hard to find. I’ve done 2000 authentic underwriting on deals in the last 2yrs and I’ve not seen 35% expense yet, the lowest I’ve seen was 44.7%
Now that Mr. Peter said it, I’m 1000% motivated to look for one, thanks for the motivation
Learn more about how Total Operating Expenses are calculated here: www.commercialpropertyadvisors.com/commercial-real-estate-terms/#opex
You’re the best on commercial real estate education
You are very kind. I am blessed to be able to do what I love; teach others how to successfully invest in commercial real estate.
This was a good breakdown on how to evaluate multi family properties. Highly informative blueprint! I appreciate your knowledge 💯
Thank you!
best breakdown ive seen on youtube.
Great video! Clear, precise & to the point! For the COCR calculation, if the building is a value add I'm assuming we'd add deferred maintenance or CAPEX in with the down payment?
As soon as I saw that the asking price was $1 million and you were collecting $1,000 per unit on a 12 unit building I knew this was going to be a 'go'. This feel like a property in a C class area. I'm sure there's a easy to make spreadsheet that helps do this even quicker, and that spreadsheet could be used to help turn a no-go deal into a go by making changes to what you are willing to pay. Every deal's a potentially good deal at a certain price point.
How do you break down the 750k at 6.5% to get the monthly payments?
Hi There,
Its a pretty intensive calculation, but there are tons of free tools online that can help you calculate this. Just google your question and some should pop up :)
i couldnt figure this out either 🤔
I’m guessing he made a mistake on the calculation. 5,400 is 6.5% of a million
I think it’s because he didn’t show the adjustments for the arm rates . Eg months before first adjustments ,months between adjustments and maximum interest rate cap .this will through off the monthly payment buy a few hundred dollars
He did say he was going to make some deal assumptions
Should we have a maintenance reserve?
Great video. Simple explanation. It's probably important for everyone to look at their individual market and cater their numbers toward that. I'm interested to see what a deal would need to look like using a 3.5% down fha loan and what would make such a deal a "go". Thanks for the video
When you’re calculating cash on cash return do you include closing cost as money invested? In the example you have the down payment
Yes! Include any closing costs that were added to the down payment on the closing statement because it's part of your original investment
how did you calculate mortgage for 25 years at 6.5 % for 750k?
Ty for this video! Super simple and informative! I subscribed to your channel because I love you guys!!!! ❤️♥️❤️♥️
Thanks for subscribing!
Great info, thank you and YES.....evaluation done in less than 5
Thanks for watching!
If I build the triplex from scratch, do I use 35% expenses like you mentioned, even though it’s brand new
That was absolutely amazing. Thank you for the clear explanations.
You're very welcome!
Hey mr.harris always good to watch the videos you've done over the years I learned a lot from them in the crei
Marvelous! Thanks for the comment.
Excellent video!!! Thank you for this information 💯!!!
My pleasure!!
Thank you great video!!!!! I learned alot from your videos.
Glad to hear it!
Thank you very much Mr. Harris you wrote the note for teaching others on the board - this reminds me when I was learning best in my high school time wow it’s so awesome to learn & understand. Following to learn more 😃👍💕
Glad it was helpful! We appreciate your feedback!
Thank You! for your Kindness and Big Heart
You are most welcome!
Great great information Peter. Thank you! Do you offer template run numbers?
i love this channel CLEAR VALUE GR8 JOB !!!
Thank you!
I need to learn this
Love your videos. Is it fair to assume the 35% rule for Opex does not include Property mgmt cost and reserves for repair and capital expenditures? With Prop Mgmt (i.e.10%) and these reserves, would you agree that the baseline would then be closer to 60%?
This is awesome! I'm analyzing my first multiunit for purchase and this is very helpful. New sub here
Glad it was helpful!
Can you include everything under operating costs?
Also how to estimate hoa fees?
These are best easy to understand loose info
Thanks
How did you get the loan monthly payment? Not adding up to your number
amazing video, everything is correct except for the mortgage payment of $5406, with those numbers its actually $5,064. Can anybody double check this?
Awesome lesson
Thanks
Great video, and thank you very much!
Glad you liked it!
Great great information sir thank you
Thanks for the compliment!
I feel smarter already!
Thanks for watching!
Thank you
You're welcome
Why short the process timing when it still took 5 min to get the metrics etc? To be able to do all of that in 10-15 min is still good when it comes to commercial property investing. 😎 thanks again
If it sounds good after 5 minutes, then dig in deeper. You can always spend more time evaluating a deal but if it doesn't have some merit in the first 5 minutes, it rarely gets better the longer you investigate.
Great Info‼️. Thanks
Glad it was helpful!
Thanks Peter!!!
You are most welcome!
Do you typically just ask your RE agent for the cap rate in an area? ....or is this info available to non-agents?
Yes! Ask local brokers and appraisers but also don't forget to try out AI too. This video explains: ruclips.net/video/wXP9V5ozMjY/видео.html
This is great! Just watched the video. Thanks for being so helpful.
When you talk about expenses - you mean HOA, Property Tax and fixing cost all included in that 35%?
Do you have a course for building multifamily?
No! Instead, this is our perspective on development: ruclips.net/video/4ecAJPm_sFw/видео.html
great job
Much appreciated
Where do you put the cash down?
For the CF this affect the COCR no?
A very helpful training on understanding the relationship between cash flow and cash on cash return is here: www.commercialpropertyadvisors.com/commercial-real-estate-terms/
Hmm...I wonder if I would be considered a mentor? I show people a turnkey multifamily investment opportunity and give them all the information they need to make the most informed decision possible. However, I only work with the one opportunity. Would that count do you think?
Why do you use a 25-year amortization period?
Most lenders will not allow 30 Am loans. 25 years is usually the max.
What happened to 50% for expenses Peter? Especially in this environment
The expenses rule of thumb is getting a lot of feedback on this video. Some argue that the 35% rule is best applied to under 10 units. Whereas above 10 units, 40-45%. For this video, I was trying to keep it simple. Lending underwriters use 35% as their rule of thumb.
TY!
This is great, thank you! =)
You're very welcome!
GOLD
Doesn't your book say that 50% is the average for expenses? Aren't most banks requiring 30-35% down on these types deals. And isn't debt closer to 7,5%? These changes make a big difference in the underwriting and render this not such a good deal. Expenses are go mg up not down. Pencils down?
The expenses rule of thumb is getting a lot of feedback on this video. Some argue that the 35% rule is best applied to under 10 units. Whereas above 10 units, 40-45%. For this video, I was trying to keep it simple. Lending underwriters use 35% as their rule of thumb.
👑
It's humbling to get that. Thank you.
I’ve only seen 35% on pro forma’s which were a long shot from the truth
The expenses rule of thumb is getting a lot of feedback on this video. Some argue that the 35% rule is best applied to under 10 units. Whereas above 10 units, 40-45%. For this video, I was trying to keep it simple. Lending underwriters use 35% as their rule of thumb.
I think the annual debt service calculation may be off. Monthly payment = $4,062/month ($48,744 annually). I based this off $750,000 loan, 6.5%, 25y Amortization
Strange that an owner looking to sell his property would not make all this information readily available.
Grandpa
$5,406 X 12 = $64,872 🤷🏼♂️
Probably didn't clear his calculator but the basic principle still applies, cash flow around 24k instead of 28k. Still about 9% return on your money vs bank at about 5% there are other advantages like tax depreciation, and equity growth, looks like a solid deal, but if you had a hard money loan at 10% for down payment it would be negative so it's not a start with no money deal.