Apartment Deal

[Josh Rich]

Hey BP Friends, would you mind helping a low experienced apartment investor out?

This year I am wanting to start investing in apartments and this deal came to me today, after my inquiry, and it is 18 of 70-80 units to sell in a complex. The market is strong, good job outlook, and sound economy.

My concern is that with so many other units in the complex that I lose control of the condition and pricing on those competing units. If one owner decides to reduce rates to lower vacancy, it can become a race to the bottom to stay competitive. The details are as follows:

DETAILS: (From Owner) I have decided to sell my 17 condominiums and one 1st mortgage note against the 18th unit (73K is owed to me now unit is worth 40k .)

After deductions for management of 5% (seems low), vacancy rate of 6% (100% occupied now), 14% for maintenance to units, $195 monthly HOA condominium fee for all exterior grounds, parking and h20, sewer, insurance, pool, trash etc. plus annual property taxes $900 a year (also seems low) I net net net just over $71 k now.

Rents are about 3 to 7% below market depending on unit too. Putting rents at market at this time would be your upside as all owners are currently full it would meet with little resistance and put income to a net 80k approximately. At present price $795k and rents you enjoy a 9% cap rate you could take it up to 10% quickly

I am open to selling some or all units. I am able to take trades but do not have any need to 1031 these properties.

Thoughts? Dangers to watch for? Questions I should ask the owner? Other?

Thanks in advance for any and all advice!