Apartment Building Question

[Robert Coomer]

Hey Everyone,
I just found an apartment building for sale at what I think is a great price, but I would like a second opinion. Here is the information:

List Price: $345,000
Units: 16, All 2BR 1BA
Rent Price: $600 per unit (low estimate)
Taxes: $6,890 per year
Insurance: Approximately $12,000 per year (estimated $800 per unit... is this even close?)

I am very familiar with single family residential homes and have been a wholesaler for a while (over 12 homes last month), but I have never invested in a multi unit building. What other costs am I over looking and would this be a good deal?

[Michael Rossi]

Let's hope not!!! The fact that many landlords screw up their property gives us the ability to buy apartment buildings at a huge discount.

I don't judge the deal based on information provided by the seller. In fact, I usually don't even ask for the information (other than the leases). If an owner is incompetent and failing, the last thing I want to do is base a decision on the property on their numbers!!!

I KNOW my market. I know the rents; the vacancy rates; and I can look at a property and decides what maintenance it needs - all without input from the owner.

Even if you did get financials from the owner, they won't show you the real story. Distressed owners often defer maintenance for YEARS and they often load their buildings up with riff-raff or allow the building to have large vacancies because they've given up. None of that has anything to do with how the building will perform for me.

So, I include any deferred maintenance and a suitable short term vacancy/eviction expense in the acquisition cost (so that I can churn the tenants). Then, I figure the operating expenses based on the 50% rule.



Commercial apartment buildings ARE residential rentals. "Residential" means that people live there.



What's the point of having a forum if you're going to analyze posts outside the forum?



Why would you want to sell the goose that lays the golden egg?

Mike