Need Help/Advice on an Apartment Complex

[Jason Britt]

I'm feeling very overwhelmed right now and need some guidance.  I've been on BiggerPockets for a little over a year, just reading and listening to as much as possible.  This site is amazing, and I've learned so much, but not enough to feel comfortable working a deal.  I'm trying to put what I've learned into action, which is a little scary on my first possible deal.  I've missed out on so many deals because I would just sit on the sideline and not take action, so now I'm ready to take action and try to do something about it.  I've wanted to do this for a long time, but just didn't have the courage to do so.  After reading some of the success stories, which finally motivated me to finally do something, I decided to run it by my wife.  I asked her what she thought about me buying one rental, preferably a single family, to my surprise she said sure.  I then told her that I'd like to have about 40 in the next 5 years, then she asked me if I'd lost my mind.  Stay with me, I'm about to get to my original question.  I recently found out about 2 apartment complexes that had been for sale, but for some reason the deal fell through.  They haven't been put back on the market but I had a realtor friend to check on it for me and they're still for sale.  This intrigued me because I had just watched some videos and read some blogs about apartments.  I go back to my wife and tell her I found a way to get my 40 units at once.  I just knew when I told her the price that she would throat punch me, but believe it or not, once I told her the numbers and my plan for financing it, she was on board again, last thing she told me was to not bankrupt us.  So now to the numbers; these are two different apartment complexes within about 2 miles on each other, the owner is wanting to sell them together; these are being advertised as 45-turnkey units, 8.07% cap rate, 96% occupancy, List Price $1,750,000.  Found an ad advertising a six month lease at $575 or a 12 month lease for $555.  I figures are based on $550 a month.  I'm trying to get my figures as close as possible because there is still some information that I waiting on.

I'm still not 100% sure what my offer will be, so I'm running these numbers on a price of $1,450,000. My plan is to bring my uncle in for the down payment, plus come of the closing costs, at $309,000. I would pay him back at 10% interest for 5 years @$6565 a month. Then finance the rest on a 30 year fixed @ 5%. We would form a LLC of some type. So the payment to the bank would be $5331.

Rent=$550

Taxes=$15

Insurance=$25

Vacancy=$55

Repairs=$10

Cap ex=$20

Property Management=$55, which I used 10% of rent

Mortgage=$118

Total Expenses=$298

Cash Flow=$252 per unit

If I calculated the ROI right, I came up with 45%, like I said, It may not be right.

Any feedback would be great, I tried to accurate with the number, I know the taxes were right, not sure about the insurance. I calculated it based on $250 per door. Insurance agent is supposed to get back with me tomorrow. Like I said earlier, if the numbers don't work out, I'll move on to the next one. My ROI seems high to me, that's the one that worries me the most, I may have miscalculated. One other thing, I supposed to be getting my questions up for the seller, I have several, but if there's some specifics that I need to ask please just let me know. I appreciate any and all the help I can get. Thank you