Apartment Building Woes

[Terrence W.]

Hi all! I'm starting to look for a 10-20 unit buildings in my local area and from what I have seen there are some pretty terrible deals out there. Maybe I'm going about this wrong and someone can help correct my thought process (I'm using the 50% rule to estimate expenses since the proforma data seems suspect).

Here is one example that I have seen:

Property X	$2,200,000.00
Down Payment	$770,000.00
Loan Amount	$1,430,000.00
Annual Loan	-$86,947.20
Units	11
1bed	3
Rent/unit	$1,015.00
Market Rent	$1,050.00
2bed	8
Rent/unit	$1,279.00
Market Rent	$1,305.00
Gross Income	$167,684.00
NOI (50% rule)	$83,842.00
Yearly Income	-$3,105.20
Cash on Cash	-0.40%
Actual Cap rate	3.81%

Almost every property in my local area looks pretty similar to this one with negative COC or COC of 1-2%. Only way it seems that you can make money is to buy with all cash and then you are making some pretty paltry returns that will barely keep up with inflation.