Check on Modeled Returns for Apartment Property

[Zach Bollman]

Hello all,

I am currently modeling returns on an 8-unit apartment building. The property has been recently renovated and is for student rentals as they're single bedroom units.

I've yet to find a property worth pursuing based on my investment profile and have spent a lot of time learning about real estate investing from an investor's perspective. However, I'd like to get input on the numbers I've come out with and what everyone's general thoughts. The basic information is below and comes from owner-supplied rent roll and 2017 figures:

Listed Price: $339,000

Gross Rent: $47,520 ($495/month per unit)

Taxes: $1,506

Trash: $666

Utilities: $6,406

Cable: $1,982

Maintenance/Repair: $4,673

Insurance was not listed in the numbers given, so I estimated insurance to be around $1,617 based on 0.003% of property value plus $75 per door. I also applied a vacancy rate of 12%, which I believe to be somewhat conservative given this is student housing near a university which provides for a stable cycle of tenants. The below numbers will give my calculations, and for debt service, I'm assuming 80% LTV, 5% interest, and 30-year amortization (I understand these terms are possible to find even for multifamily).

Gross Rents: $47,520

Less 12% Vacancy: -$5,702

Net Rent: $41,818

Less Op. Exp.: -$13,727

Less Taxes: -$1,506

Less Insurance: -$1,617

NOI: $24,968

Less Debt Service: - $17,470

Cash Flow: $7,497

Now, based on these numbers and 20% down, I'm calculating around an 11% cash on cash and a 7.4 cap rate. Overall, this seems like a significantly overpriced property, one which I would likely need to bring the purchase price down to closer to $280,000 for this property to make sense with a 19% cash on cash and 8.9 cap rate. 

Would love to hear general thoughts on the numbers, modeled returns, and my general aim for a cash on cash return above 15% in a multifamily property. Thank you for your time.

Zach