Deal or no deal?

[Mark Swim]

I’m in the early stages of looking at an 8-unit apartment building and would love some feedback on my numbers to see what others think of this deal (or no deal). I visited it this morning and was only able to get into one of the units, for now. It’s in a working class neighborhood and I would rate the place as a B or B-. From the research I’ve been able to do it appears the rents are about $75 per month lower than the average of other buildings in the area.

The owner has several other properties and is liquidating some of his holdings. They will not share the P&L and rent rolls until there is an excepted offer. The offer will contain a contingency based upon review of the P&L and rent rolls, and the owner is fine with that. They are not interested in any owner financing and have already rejected offers from other investors of $270,000 and $280,000. Here are the numbers that I have so far.

Building size & type: 8 units, brick exterior

Location: Green Bay, WI

Year built: 1972

Apartment size & layout: 822 sq. ft. – 2 bedroom, 1 bath

Price: $299,900

Income

Rent: $525 per unit

Coin operated laundry: unknown

Expenses

Property Taxes: $6,620

Insurance: $3,000 estimated. I haven’t gotten a quote, yet.

Property Mgmt: 8%

Maintenance: $2,000 per year estimated

Electric: $119 per month average for common areas. Tenants pay their own electricity.

Gas: $171 per month average. Landlord pays all gas.

Water: $309 per month average. Landlord pays all water.

CapEx: $189 per month estimated.

Vacancy: 10% estimated. The average for the area is around 5%, but I’m using 10% to be safe.

Other expenses that I don’t have: lawn care, garbage & snow removal. Any others that I’m not thinking of?

Financing

My financing estimate is based upon another property I purchased and will hopefully use the same bank. I haven’t approached them about this property, yet, but am optimistic I can get the same terms as before: 5 year term amortized over 20 years, 25% down, 4.5% interest rate.

When I run these numbers it doesn’t look too good, but I’m not sure how accurate I am with some of my estimates. I’m curious to see what others think. Thanks in advance for all of your help.