48 Unit Apartment Complex
In advance thank you for your responses. I have been reading diligently for the last several weeks and there is a vast wealth of knowledge to be gained from you.
MLS listing reads, "48 unit complex, Great interstate access, New Roof w/ warranty, Great Cash Flow!"
General Info.
The complex consists of four two level free standing buildings. Tar & gravel roof. Pool in the courtyard. Heat: Panel Ray, Cool: Window units, Paved parking, Brick & frame construction. Built in 1969.
Unit Info.
(33) 1bdrm/1bath, 650 sf-rent for $375-$400
(15) 2/bdrm/1bath, 850 sf-rent for $425-$450
Asking price: $1,060,000
It was just bought in May 2004 for $910,000
Background info.
Prelim. site visit indicates the complex is in need of some fix up. There are three similar apartments within four blocks, low to medium income. A home builder has moved into an office in the immediate area and plans to start construction on a new subdivision.
Financials 2003 (obtained from owner)
Income
Rental Income: $200,881
Other Income: $5,389
TOTAL: $206,270
Expenses:
Payroll: $6,200
Maintenance: $13,000
Property taxes: $8,432
Advertising: $250
Eviction Costs: $250
Pool Maintenance: $624
Carpet Cleaning: $600
Extermination: $900
Landscaping: $ 1,450
Gas: $15,480
Eelec: $33,022
Water: $22,522
Insurance: $10,161
TOTAL: $112,891
I noticed they didn't account for Vacancy rate, property management, gargabe, replacements, accounting/legal, am I missing anything else?
My question is then, is this property worth pursuing or is it an alligator?
Regards,
Gene
Does this deal require conventional financing? The cap rate looks at about 8.8% which isn't too great. However buying something over nothing is sometimes a good thing.
1. They did account for vacancy in that if you total up all the possible rents and the actual reported income that is your vacancy.
2. They did account for management as there is $6200 in payroll.
3. They did account for replacements/maintenence
4. Garbage is one expense they did miss.
Frankly you should look at if this deal is possible for you. If you are purchasing conventionally then I would pass on the deal as there are better deals out there that you can throw your money at.
However, if you can get good terms on this, and you are confident in your ability to run this place, then this may be something to consider.
Price vs terms is always the struggle. As stated there needs to be some good terms or I would pass on the price.
I would also be intersted why the seller decided to sell so quickly. Was this sale planned or is this a possible sign of modivation? Or possibly a sign of a major problem somewhere...
GOOD LUCK
Well its not an obvious home run but it has potential. Like Frogger I'd ask about why the quick flip. Given the asking price by the time they pay a commission they are pretty close to selling this for what they had in it. That means most likely that they decided they don't want to manage it anymore. That may mean the opportunity for good terms.
How much do they owe?
You say there is deffered maintence. If the place were fixed up could you get a rent increase?
I would get hold of the IREM income and expense numbers for the area and compare their averages with the subject property.
Good luck.
Some of these numbers don't look right to me .
such as maintenance cost of $13000 for 48 units ,
seems too little, same goes for carpet cleaning etc.
You might want to look at those numbers more carefully, and find out more about those expenses.