How to underwrite an apartment building that's unoccupied?

[Joseph Sangimino]

All, 

I need some advice from the community. I'm in the early stages of analyzing an apartment complex for sale in my target area. It's currently unoccupied so I'm at a loss as to how to underwrite it properly. It may be too much of an endeavor to remodel, but that has yet to be determined.

There is an interesting back story: the current owner sold the property about 14 years ago to another investor after remodeling the entire property (he described it as being in  "immaculate" condition at the time). The new owner proceeded to neglect the property to the point where the roof was actively leaking into many parts of the top floor. The township shut the building down and forced the owner to have all the tenants vacate since he couldn't afford to fix the roof.

The property went into foreclosure and the previous owner purchased it back. He got an estimate to put on a new roof, but hasn't provided it to me yet. I think he got involved in franchise investing and no longer wants to go through the hassle of dealing with another remodel of this building, so hes trying to wholesale it.

Its a 20 unit brick building that is 100% vacant. He says many of the units are in good condition and that hes not aware of any active mold or structural issues (needs verified obviously). The roof was fixed in a temporary manner to prevent further damage and active mold. He said the roof needs repaired, the top units need remodeled, the building needs cleaned. Then it should be able to go back on the market once the township approves.

Although this is a lot of work, if there are units in good shape that can be immediately occupied once the roof is fixed, I would be willing to take on this challenge for the right price - hence why I haven't been scared off yet. Hes asking around 450k. I ballpark a new roof to be somewhere around 100k. At the time he sold it, $650 was the average rent - which have since increased.

I dont know how to underwrite it since there is no income currently being generated and I dont understand what comps could be used. Comps from other buildings would be based on income, so aren't they essentially irrelevant? Should I take $/ft^2 from single families in similiar condition and extrapolate it to the square footage?

Thoughts?  Thanks!!!