Is This 26 Unit Apartment Priced Too High?

[Todd Keith]

Hello BiggerPockets,

Can you seasoned multifamily investors give me some feedback on this deal that I am looking at right now. 

It's located in a Class C area in Akron, OH.  

Here are the details: 

• 26 unit property (All units are 1/1)
• All units are rented out at $525/mo for a GYI of $163,800
• Onsite laundry brings in $6,000. 
• GSI (including laundry) is: $169,800
• According to the current owner Op Expenses are 26.14% of GSI.
• All units are rented, but I'm figuring in a 10% vacancy rate. 
• Running the numbers on this one, the NOI is: $108,434
• Asking price: $1,000,000

Asking price seems high to me. What do you think? 

Thanks, in advance, for your feedback

Todd

[Andrew Johnson]

@Todd Keith Does the current owner use a property manager?  It's always nice if there's some neutral 3rd party that's telling you OpEx numbers.  You also have no clue (at least I'm guessing you don't) if they are doing 100% of the labor themselves and really driving down those maintenance costs.  Regardless, the OpEx percentage seems low.  You should be able to take a peek at what they pay for insurance, look at the property tax records, and maybe trying to fudge what they are telling you they pay for maintenance, landscaping, property management, etc.

I know this is really obvious but cap-ex for a 26-unit place is where you could get killed.  Roofing for 26 units, HVAC issues, resurfacing the shared parking area, etc. are all high dollar items.  And for a current owner it's really hard to "get your money back out of it" when you resurface a parking lot.  It's not like you could charge more rent and you have to depreciate the expense over time.  Not fun stuff.  And could be a reason to sell.

The other thing to think about (speaking from experience) is that 1 bedroom/1 bath places are a little bit of a unique animal.  It's arguably better to have a mix of 2/1 and 1/1 to appeal to a broader range of renters.  Having *only* 1/1 can be limiting.  You really have to know the tenant population in the area.  The last thing you want to end up being is the "low cost option" in the area.

Anyway, I don't know if any of that helps...