20 Unit Older Apt Building - Your Insight Is Needed

[Josh Justiniano]

Just put in an offer for around 715k on a building in a lower income area in Chandler AZ, but surrounded by good neighborhoods with great schools, as well as higher income areas This particular neighborhood's median household income is around 30k whereas surrounding neighborhoods are 60k-85k. Good employment and strong economics it looks like.

It's an older building on a master meter. Built 1938 (Yikes!)

Our plan is to sub-meter to save on those utilities. 

First question: Even if all the big ticket items such as roofing, plumbing, electrical, etc... has been kept up, what are your opinions about building older buildings? Please share some experiences.

Second Question: How do these numbers compare to your "average rule of thumb" numbers you might use in an analysis? Are these figures too high? Too low? 

Gross Potential Income	$132,000
- Vacancy	($10,560) 8%
- Concessions, Loss to Lease, Bad Debt	$0
Effective Gross Income	$121,440
Other Income (Laundry)	$2,500
Total Net Income	$123,940
EXPENSES
Real Estate Taxes	$12,500
Insurance	$0
Contract Services	$2,190
Trash Removal	$0
Electric	$0
Gas	$0
Water and Sewer OR All Utilities	$37,500
Legal	$1,000
Management Fee	8.00%	$9,915
Repairs and Maintenance	$7,500
General/Admin	$1,100
Payroll	$0
Other	$500
Deposit to Replacement Reserve	$3,000
Total Expenses	$75,205
Net Operating Income (NOI)	$48,735
Debt Service
Principal	$7,384
Interest	$24,857
Total Debt Service	$32,242
Total Distributions to Members	$16,493
Member Contribution	$234,163
ROE	7.044%
Member Cash on Cash Return	7.04%