How much would you pay for 156 Units in Atlanta?

[John Quiles]

I got this deal on my lap and it has 176 units in Atlanta (Decatur) 95% occupied.  According to the P&L it gets around $993k on rent with about  $375k on expenses.   The buyers broker wants 4% commission pay by the buyer.  All my experience is in flipping.  I have no experience in multifamily so I'm wondering how much should I offer, how much do I have to spend before we even close, and how much are the closing costs going to be?  

[Joel Owens]

I wouldn't consider a building from the 1960's a B-.

There are some multifamily buildings in Atlanta that are real crap holes. The area and the tenant demographic.

Seller sounds like they are desperate to get rid of a problem. Look at tenant loyalty factor meaning how much of a percent of units have been there for 2 years and paying on time? If it has constant turnover or a history of no or partial payments that is your first red flag.

The good areas that I like have pretty much been picked over the last 4 to 5 years. Those investor owners are holding or if they do sell target 1031 buyers who are willing to pay a low cap rate to avoid high tax penalties.

60 to 65% expenses all in are common of overall rent.

993,000 rent X .35 (65% costs) = 347,550 NOI

347,550/5,000,000= 6.95 cap rate

That is not even taking away deferred capex needed. This is probably overpriced junk being passed off as a deal.