Five Units Or Thirty: Which Deal Wins

Deals don’t lie—numbers do. We put three real multifamily opportunities on the table and let the math decide: a fully occupied five-unit with suspiciously low expenses, a ten-unit limping at 80 percent occupancy, and a 2022-built thirty-unit that pairs scale with clean financials. Using a clear framework—verify income, normalize expenses, estimate debt service, and translate into cash-on-cash—we reveal how small shifts in vacancy, management, and capex can flip a “good” cap rate into a headache or turn a steady performer into a standout.

First, we test the five-unit’s thin expense line and show how one vacancy can erase monthly profit. Then we tackle the ten-unit, where stabilization is the whole story: inconsistent rent data, no management baked in, and a path to break-even that only works if you fill units and enforce market rents. Finally, we dig into the thirty-unit new build. With T12s showing meaningful other income, a reasonable expense ratio, and room for a realistic 100-dollar rent lift, the cash-on-cash improves and the potential value creation over a decade becomes hard to ignore.

Along the way, we share practical underwriting habits: model vacancies even at “100 percent,” add third-party management even if you plan to self-manage, and run sensitivities on interest rates, expenses, and rent growth. We also talk about partnerships, investor structures, and why scale can smooth out the noise that wrecks smaller deals. Ready to sharpen your buy box and pick better properties? Hit play, subscribe for more deal breakdowns, and tell us which deal you’d chase—and why.

Chapters

• 0:00 Goals And Deal Analysis Framework
• 2:20 Five-Unit Property: NOI And Cap Rate
• 7:45 Sensitivity Checks On Expenses And Risk
• 12:53 Ten-Unit Property At 80 Percent Occupancy
• 20:40 Reforecasting To Stabilized Performance
• 23:45 Thirty-Unit New Build: Cap Rate And T12
• 31:15 Scenario Analysis And Rent Upside
• 38:30 Investor Structure And Next Steps

Transcript

SPEAKER_00: 0:00

All right, on today's video, we are going to be going through some deals and analyzing them, breaking them down, seeing what they look like, and if they're a deal that might be worth doing or not doing. As I've mentioned, one of my goals this year is to buy um an apartment building, some apartment units. Um, I've looked at everything from duplexes to 30 units, 40 units. So I'm trying to find where it fits in there a good deal. And so we're gonna go through some deals today and see what they look like. So let's start with one that I've talked to a local realtor in my area and she sent me a few deals. Um, this was one of them. It is five units. They say that it is fully occupied. So I'm gonna be using um a deal analysis um chart, um, whatever you want to call it, but from Grant Cardone. Obviously, I've watched his videos, and I'm sure a lot of you have about apartment buildings, and so I I break them down pretty much how he would. Um, there's some other ways I do it, which are a little bit more detailed, but we can get into that later. So this is kind of a simple way just to look at a deal. If you've ever watched any of his videos, um, this is kind of where I got that and how I'm gonna analyze videos as well. So I'm gonna go through this one five units. Um they are asking five seventy-five, so five hundred and seventy-five thousand five units. All right, and the realtor actually sent me um okay. The realtor sent me the PL statement from twenty twenty-five. So this is a deal that I've recently been looking at in the last twenty-five days since January started. So last year they said that their operating income was forty eight thousand eight twenty-seven. So, first of all, the way I break down these deals is we're gonna look at the income, we're gonna look at the expenses, and then we're gonna look at the asking price, what the down payment would be, what the rough estimate of debt would that uh would be on that, and then we're gonna look at um our cash on cash, cash on cash, dollars and percent. So we look at it both ways and can tell if it's a good deal or not. Just because it has a good percentage, it may not be a lot of money, and just because it has a lot of money, it might not be a good percentage. So we look at it both ways, and the other way we can tell how much we're paying for a deal is the NOI, which is the net operating income. So that is the income minus the expenses is your NOI. So on this deal, so we're gonna look at the income, we're gonna look at the expenses, we're gonna figure out the debt, and then we're gonna look at the cash on cash return. Okay, so the other thing that comes up in these is cap rate. So the cap rate is sometimes in deals that you look at, so I'm looking at these deals on Crexy. Uh, this one the realtor sent me, but it's on there as well. But sometimes they'll have the cap rate on there, and the cap rate is if you paid cash for this deal, the expected income that you should expect. So let's say it's 10%. So you should expect$57,000 cap rate, which would be your NOI. Okay, this one doesn't have it, but um, that's one that comes up a uh a lot as well. So these are the four categories that we're gonna be looking at these deals. So let's get started on this one. So this one says 2025, their net operating income was 48,827. So let's say fifty thousand. Okay, and that was the income in twenty twenty-five. The expenses okay, they say expenses they say ten thousand dollars, but I know that's not right. Um, what happened here? Okay, um, they do have maintenance in there at five thousand dollars, which ten percent kind of makes sense. So all right, look, we're just gonna go with what their numbers are. So income fifty thousand expenses, um ten thousand, so fifty minus ten, so our no y is forty thousand dollars. Okay, I meant to put no i in here, but no y forty thousand dollars. So our income after expenses, the noi is forty thousand dollars. So let's say we pay cash for this forty thousand divided by that's a six point nine five cap break. So seven percent. Okay, which is not too bad. All right, and let's say we paid fifty-seven thousand five seventy-five for this. Let's say our debt's gonna be twenty-five percent 143. So let's say our down payment is now gonna be one hundred forty-four. Okay, let's take a general, let's say six and a half percent, could be more or less, but our debt is going to be on that on that um oh, I'm sorry, uh, five seventy-five minus one forty four. Our debt is gonna be four thirty-one, and on that we'll multiply that by six and a half percent. That's gonna be twenty-eight thousand one five a year, okay. All these numbers are per year, so you want to analyze it per year, not one month, six months, whatever, even multiple years. Um, just do a per year analysis. So it's making fifty thousand dollars a year, the expenses are ten thousand. That leaves with us us with forty thousand dollars. So if we do forty thousand minus the twenty-eight minus the twenty-eight, that leaves us eleven thousand nine hundred and eighty-five thousand. That let's say a thousand bucks a month we're gonna net out of this deal. And if we take that divided by our down payment, eight point three two percent. Okay, so on paper, this isn't a bad deal, but it's five units. So if you have one person that um moves out, then your occupancy goes down twenty percent. So if you take twenty percent out of this number, these numbers don't you you're probably losing money. Okay. If you're watching the video and you have any questions about this, please let me know, comment, and also if you analyze it a different way, then let me know that as well. We can try it out on future videos. Okay, so this is 575 five units. We're gonna net$12,000 or 8.32 percent. This number is pretty low. I would probably inquire more about this, about why is it that low? Um at fifty thousand dollars, that is twenty percent. So typically I analyze it at thirty or forty percent, depending on the size of the deal. So if I did fifty thousand times point three, that's fifteen thousand, and this is go down another five thousand, which now you're at what is that six thousand, yeah, sixty nine hundred dollars. So now you're netting five hundred bucks a month, and this percentage goes down as well. So for five hundred dollars a month, do you want to own five units? Have to deal with five different tenants. That would be the question on five units versus the bigger deal. But based on their numbers, may not be too bad. All right, let's look at another one. It shows up really good. All right, let's look at another one. Uh, this is another local deal. Um, let's see if I can pull this one up. Okay, this one is ten units. Okay, this is ten units. By the way, that last deal said it was a hundred percent occupants uh occupancy, so we should, based on their numbers, be getting the full amount. This deal, however, it's ten units, but they're eighty percent occupancy, so they're not even a hundred percent occupant, and they're asking one point four million dollars, hundred forty thousand a unit, and it's at eighty percent. Okay, so let's see what their numbers say. I don't have a rent roll or anything for this. All I have is um one, two, three, four. Okay. All right, so the numbers I have are uh their current, let's see, nine fifty plus seven fifty. Twelve sixty plus one forty. Okay, eighty seven ten times twelve. Okay, so um based on current rent at eighty percent, they say they're getting a hundred and four thousand. Um the statement I have though is from it's like late 2024 till late 2025. So I'm not sure if it's um accurate, but we'll go by their numbers. So based on their current rent, 80% occupancy, they should be getting 104,000 in rental income. Um they're giving us a pro forma, which I don't look at those. Uh I'll look at market rents and see where the difference might be if there's any upside there, but they're saying the pro forma should be 152,000 of rental income. So they're$50,000 off. And the statement that I have is even less. So based on the statement I have, so their income is now I'm gonna look at just the numbers they give me. So when I'm talking to a realtor or uh the broker um or someone on the deal, then I can drill down on those questions and ask them what the actual numbers are if they have numbers in different places. Because on the same sheet of paper the broker sent me, there's two different numbers. So they're saying their income is ninety-five, six, six, five. So ninety-six thousand dollars expenses they are saying is twenty-five thousand dollars, which there's not a real big breakdown here, but it looks like they don't have any management in place at all. So if I went and got a manager, you know, eight, ten percent, I always do ten percent. That's another nine nine thousand six hundred dollars a year. So, but they say twenty-five thousand. So let's go with that number. We'll do it both ways, we'll just add another ten thousand on that and see what it looks like. Okay, so ninety-six, twenty-five. Let's put this at twenty-six just for easy math. So that's seventy thousand dollars. So their NOI is seventy thousand dollars. Okay, so our debt. Okay, one point four twenty-five percent. That means we're gonna have to put down three hundred and fifty thousand dollars. Okay. That leaves us with one thousand and fifty. Okay, times point oh six. What is that? Seventeen hundred bucks? Yep. Seventeen fifty. Okay, and that's the the expenses of where they are. Okay, so we add ten thousand dollars to that, we're losing nine thousand dollars. Now, if you can get this to a hundred percent occupancy, okay, so let's say ninety what did we say, ninety-six thousand? Let's say ninety-six thousand um is eight eight units, ninety-six thousand divided by twelve divided by eight thousand bucks. Okay, so let's say um thousand times twelve plus ninety-six thousand. Okay, so let's say we get it to a hundred and twenty thousand. Okay, they're saying we can get it to one fifty-two, but let's say we can get it to one twenty. Okay, and our expenses are are 26. 120 minus 26. Now this is 94,000 minus the 68. Okay, the debt's not going to change whether we are 100% occupant or not. So 94 minus the 6850. Now we're at$26,000. Okay, that's a big difference. Okay, that's$2,000 a month. Divide that by our$350 down payment,$7.35. Okay, this is similar to the last deal. It actually is double the units and double the cash flow. If you listen to Grant Cardone, units is the number one factor looking at these deals. Double the units, we doubled our cash flow, but our percentage stays the same. Okay. So this deal isn't too bad either. The problem with these two deals is that um they're really old properties. And the expenses to me seem low. Okay, but we did this at 26. We add 10,000 to that, but we reduced that by 10,000. Now it's not as good. To have an old property, five ten units, they're not updated. So you could update them before you buy it, but then you um you need more capital up front. But you don't know what's gonna go wrong for this amount of money. All right, let's look at another one. Okay, this is one. This one is thirty units. I'm trying to get my reps in. I'm just looking at stuff. Getting used to analyzing them. Going through the math. Okay. So this one is thirty units. Okay. They are asking, I think they're asking four point five. So they're asking four million five hundred thousand. Okay, thirty units, four and a half million dollars. The good thing about this deal, it was built in twenty twenty two. So it is new. Okay, what's that? Three years old, it'll be four years old this year. So this is a new deal. Let's take a look. All right, so this one it says it's a hundred percent occupant. Okay, now this one did give us the cap rate. So four and a half million dollars, they're saying their cap rate is seven point two seven percent. Okay, which would mean at a four and a half million dollar asking price, after expenses, we should make seven point two seven percent. So let's see, times point oh seven two seven. That's an NOI of three hundred and twenty-seven thousand one fifty. Okay. So based on their numbers, after expenses, we should make that. So let's do our debt real quick. So four and a half million, our down payment would be one, two, five, which would leave us with three three seven five okay, times point zero six five. So our debt would be two nineteen, three, seven, five. So if we took two nineteen, three seven five, roughly we'd be left with a hundred whoops. Dang it. Let's say two twenty, we'd be left with one hundred seven. Now this is a lot better than those previous deals, but it's tripled the units, triple the units, and almost five times uh the income. So let's look at this. They're saying their current average rent is twelve thirty-eight. Twelve thirty-eight times thirty. So their income, let's see if this uh tracks. Income is thirty-seven one forty. Um that's per month, actually. Uh times twelve, four forty-five sixteen. Okay. So let's say expenses, let's say expenses are forty percent. So I'm gonna put that over here. Okay, so this is expenses at 40%, which on a bigger deal like this, expenses are gonna be a little more. However, it is a brand new building, so you're not gonna need roofs, you're not gonna need ACs, you're not gonna need any of those capital expenditures that maybe come up on older deals, but um, it is got some landscaping stuff that you're gonna have to cut grass and plow. And well, this one's a little more south, but you may not need to plow anything. But um, let's see what they say for their expenses. 40% could be high, but I I wanna I wanna I'd rather be high than low. And if it still works at that, then that's even better. Okay, so their T3, so that's the trailing three years, their average. Um, they're saying their rental income has been 412. Okay, so a little less than this. So let's do it both ways. So 412. Now, this could be when they first started, they might not have been fully occupied. They're saying they're 100% occupied now, so um, you know, I also I don't figure things at 100 occupancy typically, but I'm just going by their number. So that 1238 times 30, I would do it probably 95 just to include some vacancy in there. But their T3, they're saying is is 412. Okay. And so but this is pretty much total potential. I did this number at 40. Let's see what they have. Their expenses on um actually, you know what? I'm looking at this wrong. Sorry. So their T12, I'm sorry, they have other income. So they have the rental income, and they have some pet rent, other miscellaneous fees, utility um bill back. They must be getting some kind of perk on the utilities back. Um, their other income is 57,000, so their total income is 470. So it's actually more than what the rent says, which is even better. So expenses um 142,000. So they're saying 142,798. Let's do it this way, too. Okay, so I figured 178 at 40, so it's actually a little less than that. Um 30 is what they're saying. So then they come out with their net operating income. Okay, and we know what our debt is. Our debt is this, give or take, closing costs and all that's gonna be more, but that's this is roughly what it's gonna cost us, so that's not gonna change. So let's do these two numbers. Um, let's do worst case scenario. We'll do this number minus this. We'll see what it what it comes out to 445,680 minus 178,272 is 267 minus our debt at 219, 48,000 dollars. So this with this and our debt 48,000. That's like worst case scenario. Okay, based on what they're saying, it's gonna be better, but that's worst case scenario. You divide that by our down payment, eleven one two five. That's four point two percent. Say four point three. Okay. Okay, the rental minus that, you get three oh two minus two twenty. That's eighty-two thousand dollars. So at their market rent minus what they say their expenses are thirty percent, we're at eighty-three thousand dollars. So this is scenario too, eighty-three. That's uh seven point three. Okay, which could be a realistic uh number. So four seventy minus one forty-three. So their numbers four seventy minus one forty-three, that gets us to the three twenty-seven minus our debt, that's our NOI or uh our our cash on cash per year. Okay, that's this is net what we're taking home in our pocket. Divide that by our one two five nine point five percent, okay. Ten years you got your money back, nothing changes, you're getting paid, and they're saying there's room on that as well. So they're also saying that the uh where is it? Their average rent is twelve thirty-eight. Okay, the average potential is thirteen twenty-five. So that's a hundred bucks. So let's say you increase the rents a hundred dollars times thirty. That's three thousand dollars a month times twelve. That's an additional thirty-six thousand a year. Okay, so this is what they're saying they're getting now. Plus, okay, this would go at a five of six minus your two twenty, which is the debt. This goes to two eighty six. It's doubles. Divided by our one two five, twenty-five percent. So if you get another hundred bucks out of this, this is this is a great deal. I've actually called the broker on this, haven't talked to him, but this is a great deal. Um so if you get a hundred times thirty, three thousand times twelve. Let's say you hold it ten years times ten, that's three hundred and sixty thousand dollars divided by let's take the middle percentage divided by point zero seven three four point nine million dollars an additional value over ten years. Basically doubled the price. I did that right. Hundred dollars times thirty times twelve, thirty six thousand. Let's say times ten divided by point zero nine five. At this percentage it's three point seven million times thirty times twelve NOI point zero seven three four hundred and ninety-three thousand of an of additional and NOI. This is a great deal. I like this deal. At their numbers, you're making a hundred and seven thousand, nine and a half percent on your down payment. Worst case scenario, forty-eight thousand is probably a little too low. It's it's probably gonna make more than that because of the expenses, but eighty-three thousand, seven and a half percent return. You're still netting eighty-three thousand. Here's their numbers, one oh seven. You increase the rents, you get some upside there. So here's a couple deals that I'm looking at. These bigger deals, there's more potential. You need more down, but if you have a network, you get some partners, you get some investors. What we're working on is coming up with a structure for the investors so they can get monthly checks and upside of the profit when we refinance, sell, whatever. Eventually you're gonna do it, but so like a profit sharing and a monthly payment on the percentage. So that's what we're putting together now to get these bigger deals. If you're in a network, that's what you got to do. Work your network, friends, other investors. So, this is what I'm doing. If other people watching, you see this, you're interested in this. Let's get together and talk because I'm looking at stuff every day and analyzing it every day, and then just going through some on video. So, comment if you like the video. If you have different ways to do this, you have any questions about this, you want to look at deals together, you want to invest in deals, you're already doing deals. I would love to learn from you. And if not, then hit me up and let's talk about it. Let's do some deals together. Because I'm doing one with or without you, but we'd love to do it together so we can get more deals done in more units. All right, appreciate it. Catch you on the next video. Thanks.