Help me analyze this deal!

[Michael Henry]

I’ve never purchased anything bigger than 4 units so need a little help analyzing this deal. Goal is to come up with a reasonable offer price and determine if it’s worth looking more into. Currently the owner self manages so I added 10% for property management all other figures are from the sellers financials / rent roll

Apartment building

21 units - 80% occupied

Annual rents - $82,200

Annual taxes - $6425

Annual insurance - $2500

Annual utilities - $8160

Annual Maintenance - $3000

Annual management fee - $8300

All units are rent ready from what I’ve been told very basic could potentially be upgraded for a small increase in rent, rents are pretty much at market averages.

Seller is asking $645,000

[Bjorn Ahlblad]

@Michael Henry @Vincent McClendon has done a great job analyzing financials for you so far. In checking this deal out it will go way past normal numbers. 

The rents are very low-lower than the national average of 500 dollars per month and that generally means problem tenants. For a self managed assett it also means a lot of sloppiness. Leases not in order, unclear if last months rent and security deposits were all collected. Tenants won't agree with LL records if there are any. Background checks not done. That means a lot of work and mess for you and you may not have the personality to deal with these issues and tenants directly. You will need to review the leases, get Estoppel certificates for each tenant. 

Where did the 82k rent number come from-is it verifiable? Anything the seller tells you-anything-has to be checked by you-unpaid bills, liens, taxes, garbage, etc. Is there a Real estate agent or broker involved? A broker representing the seller does not protect you. I am guessing that at your experience level you may not want to strike a deal with the seller direct-I say that with all due respect Vincent. All kinds of details can bite you in the rear if things are not done correctly and that could cost you serious money and heartache down the road. 

The property and the paperwork needs thorough inspection. If you know an experienced agent who can act as your buyer's agent that might be money well spent. If not then get an experienced RE attorney to represent your interest. Potentially there is money to be made here; but it really depends on how thorough you are. 

All the best and keep us posted.