Valuing an Apartment Complex

[Steven Skinner]

Hi everybody,

I wanted to provide the forums with some general information pertaining to an apartment complex + 1 house I'm considering purchasing. Each of you can do your own math and figure up what your offer would be for the following property (I'm still perfecting my ability to accurately assess larger multi-family properties, so it's fun to brainstorm). We'll use the following:

• 13 apartments (small units w/ low rent) + 1 house
• $45,000 annual rent ($3,750/mo)
  • $1,500 taxes ($125/mo)
  • $2,800 insurance ($233.33/mo)
  • 8.33% or 1-month vacancy ($312.50/mo)
  • 5% maintenance, 5% CapEx ($375/mo)
  • $1,000/mo mortgage
  • $375/mo water, sewer, garbage
  • $300/mo electric
  • $100/mo gas
• Extra income from laundry ($5.00 wash/dry) we'll say $50

I'm not sure if the insurance is entirely accurate as I haven't obtained a quote yet, but I placed it at $200/door to reach a rough estimate; use different numbers for your own math if you disagree. These units are small, so potentially much cheaper. All units are currently occupied, am using 1-month as potential vacancy (has a history of filling much more quickly, very convenient location). The 10% allowed for maintenance/CapEx is plenty sufficient based on condition. Plans to alleviate utilities from landlord's list of bills as soon/smoothly as allowed, but should be factored in for now. I consider these all "better-safe-than-sorry" numbers. The property will be managed by landlord.

And yes, before anyone mentions it, I realize I haven't provided a CAP/GRM or anything of the sort as it would apply to the subject area. I also realize everyone has a different cash flow number they would like or expect to see. I'm not necessarily asking for direct advice on a purchase price, but rather, your opinion (based off what information you have at your disposal) of what you would offer; preferably your maximum offer, nothing including negotiation fluff. Let's have a bit of fun.

Thanks in advance for any contributions!