First multi-family deal, want opinions!

[Jeremy F.]

Hello! Want some opinions on my first large deal that I am thinking of doing (I have a couple duplexes that have turned out great but this will be my first apartment complex and I want second opinions and thoughts). It seems like these posts always lack in details so I will try to give the most information possible:

Sale Price: $575k  

Current rent: $6825 (this is topped out, no room to increase)

Loan terms: 20% down, 20 year 5 year balloon  5.75% interests

Management: 7%

Insurance: $3200

Maintenance/capex: $5000

Taxes: $8900

Vacancy: Using 5%

Property is C class and in good condition (new furnances, roof, etc) No common areas. Tenants pay all utilities. Location is in the midwest. Neighborhood is next to major employers, no crime.

Is there something I am missing? What do you guys think? Good, meh, run away?

[James Dickens]

@Jeremy F. ,

Ok this and 50 cents will get you a cup of coffee so take it for what it's worth. I have not done any deals yet but have been looking a lot at Multi-Family and crunching a lot of numbers. 

In general, I have seen some advice to go with 50% as your NOI after you take your gross - your Vacancy and to use 10% vacancy as a rule of thumb. Your numbers are just a bit different so wanted to see what I came up with to see how different they are.

If I read this right

Gross Income Reported is $81900

Vacancy 5%

GIR-Vac @ 5% is $77805

NOI $55805

From what I can calculate that works out to a 9.71% cap rate

Which puts the est Property Value at $541,867 

That's not too far off which is good.

With the 50% method and using 10% Vacancy Rate, it drops the value down to $357,862

Gross Income Reported	$ 81,900
Vacancy	10%
GIR -VAC	$ 73,710
NOI	$ 36,855
Listed Cap %	9.71
Est Prop Value	$ 357,862

Now again my math may be off but I think that you should be somewhere between those 2 numbers on price and of course that will depend on a lot of other factors and how conservative or aggressive you want to be with your numbers.