Is this a good deal? 14 unit apartment in Atlanta
I’ve got an apartment complex that we’re under contract on right now - I think it seems like a deal but this is my first time actually looking at purchasing an apartment and valuing it. Hoping some apartment investors can help me out here.
Currently the property has 1 vacant unit out of 14. The other 13 are rented for about $500/unit.
Units are all 2/1 500sqft - I’m estimating market rent is $1200 per unit.
To be able to raise rents to $1200 per unit I’m estimating $40k in reno per door. Total of $560k.
Is this a deal at $1.1MM? If there’s more info y’all need to help with this please just ask away.
Most Popular Reply
Do you have a projected NOI? Debt quote? There isn't enough here to really say, but a SWAG would look like this...
Assuming a 50% expense ratio and a 10% economic vacancy factor, your NOI would be 1,200x12x14x90%x50% = $90,720.
I also have to assume a Cap Rate. This is another total SWAG, let's use 5.5. This would mean that your stabilized value would be $90,720 / .055 or $1,649,454. Given your "all in" cost of $1,660,000, you basically aren't getting paid anything for your efforts.
On the other hand, I've made several massive assumptions, any one of which, if corrected, could dramatically change the outcome. There is a 50/50 chance the deal gets much better or much worse. You can always renegotiate with the seller if the deal doesn't look like a winner.
My one recommendation would be to get some help underwriting this deal properly so that you know if you are creating value or wasting time.
Good luck.