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Updated over 2 years ago on . Most recent reply
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38 Unit Purchase. $105k cash flow. Good deal?
I am looking at purchasing a 38 unit apartment complex in Maine. Our area is a bit cheaper market than other places in the US. The property is in an excellent location. Right in town and walking distance to hospitals, schools, municipalities. Buildings are also in excellent shape, very well maintained, but all will need roof replacements.
Here are the metrics of the property.
Asking Price $1,330,000 ($35k/unit)
Total Income - $319,500
Taxes - $31,260
Insurance - $14,760
Maintainece - $12,000
Electricity - $20,032
Heat - $22,956
Trash - $2,400
Lawn - $7,200
Snow - $12,000
Water/Sewer - $1,416
Management - Self
Total Expenses - $126,528
Net Income - $192,972
Debt Services - $89,640 with 20% Down, 5.75% Interest, 15YR/20 Amortized
Total Cash Flow - $103,000
DSCR - 2.51
Is this a good purchase?
Also, I am purchasing for 35,000 per unit, but Estimate appraisal will come closer to $43,000/unit.
Most Popular Reply
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If the vacancy rate is reasonable, this may be a good one. If the property is worth $10k more per unit, worst case is you simply flip it for a $380k profit (minus selling costs and taxes).
Maintenance is too low...need to 2-3x that figure (which will include unit turns).
Include a vacancy amount in net income and cash flow...and include cap ex reserves in cash flow...and property management fees even if self managing (may have to use 3rd party management at some point and, even if not, you need to get 'paid' for self management, which is different than investment income).
Ensure that the area is fine. $700 per month rent in some areas can be quiet and stable and a war zone in other areas.