Apartment Building & Expected Cash Flow per Door

[Dustin Burke]

We are currently evaluating our first apartment complex deal. Cap rate looks good but what is an acceptable cash flow per door for a small apartment complex? Say 10 to 20 unit?  Thanks, Dustin

[Scott Skinger]

$36/door is really thin. On a 10 unit you're talking $360/month or $4,320/year. One missed expense or problem you weren't expecting and you're negative cash flowing. Even if you are right, is $360/month worth your time? If $36/door is a year 1 number and you have a lot of value add that will raise this number up, a little different story, but still the same warnings as above. 

Personally, I'm modeling for over 10% CoC year one, over 15% CoC by year three and IRR at 20%+ for a 5-10 year hold. This is more in the ballpark of $200/door.

If you model (and buy) at $200/door you are getting good/reasonable returns and you have a much higher margin of error.

Good Luck!