PLEASE HELP!! Pricing Out 8-Unit Building
Please help,
I am looking into my first muli-unit building and I want to make sure this sounds like a good deal.
The owner bought the property 15 months ago for 250K. He has done some work but not and extensive amount (~10K). He needs out to buy into his business. He is asking 295K which is 6k above tax value.
Here are the numbers:
$3200 month - rent
$920 month - expenses (excl mortgage)
He needs 200K and is willing to finance the rest on a 10yr baloon at %7.
Please help me understand how to analyze this deal and what a fair offer is based on your opinion.
Thank you in advance for your time and consideration.
[addsig]
Well, I know that this is a bit redundant by now but the old german guy who I worked for many years ago used to have a saying: "any building, any where, any time is worth ten times one years true NOI." This is also the same as saying a .10 cap.
So if you think that the NOI is $27,00 (roughly the number you gave) then the building is worth $270,000. You can tinker with the $27,000 if you want to make sure you''ve adaquately accounted for defered maintenance, for property taxes, for management expenses.
The rest of the old german's quote runs like this,
9 times the NOI is a good deal.
8 times is a very good deal.
if you find a building for 7 times the NOI you come get me-- I will buy any building any where any time for 7 times the net.
CommercialKing....
That is the number I came up with also, using the 10% cap rate scenario. I left a voicemail for the seller and explained my rationale. Hopefully I will have some good news to post soon!!
Thank you again for your knowledge and assistance.
God Bless Our Troops!!
[addsig]