Need help analyzing this deal.

[Maggie Hawley]

Hello Bigger Pockets: I came across a 10 unit apartment building for sale in a smaller city in Kansas. This area has several factories in the area that support the community. Each unit has 2 bedroom and 1.5 baths. I am considering offering 400,000, it is a bank owned property currently. They are asking 600,000 and it has been vacant during the sale as bank owned property for almost two years. They haven't lowered the price in over a year at this point. There are no records from any of the previous owners as to the prior income on the property. The apartment need the basics, carpet, paint, cleaning and minor repairs as well as replacement of a few ranges. I'm figuring about 50,000 to get the apartments ready for rent. These units are all metered separately. The realtor I'm dealing with has a management company and he said he would charge 10 percent of the rent per unit. Rent has been estimated at 400.00-500.00 per unit and property insurance is estimated at 8700.00 a year. Turns out, part of the building is located at the end of a flood plain which adds an additional 4000.00 a year in insurance totaling the 8700. It is very hard for me to value this apartment because it has no income. I would appreciate any input as to whether this seems like a good deal or am I just spinning my wheels? Thanks so much, Maggie

[Jonathan McKay]

It looks to me like you have an incomplete picture of the expenses. You want to be able to get to an projected NOI that you trust, calculate the projected cap rate, and that can tell you whether this would be a good deal. $8700/year in insurance seems extraordinarily high to me, and based on the numbers you gave (along with a heap of assumptions I made) this deal seems like a pass.