Multifamily Deal Analysis - Would You Buy?

[Ryan Pettit]

I’m looking at this deal: would you buy it?

16 Unit Class C Apartment Complex

-Purchase Price around $600k in Texas

-Located in a decent city but not the best area of town

-Rents are below market by $100/unit but may need slight flooring upgrades to get there

-All units full

-no known deferred maintenance

-NOI if I self-manage = $70,000

Cap Rate around 12%...could be 15% if I get the raised rents over time.

Any thoughts? And is it practical to try and manage this myself? I have other rental houses so I am used to dealing with tenants.

Thanks!

[Erik W.]

@Ryan Pettit, not enough data. I don't know how you're calculating your NOI and if the numbers you're including are reasonableness or pie-in-the-sky. Also, I don't know if you plan on paying yourself for DIY management or if you plan on working for free? Also: CapEx reserves? Vacancy?

IF (big "IF" is not a typo) all your numbers are fully and accurately rolled up into NOI, then we still need to know about your debt coverage.

CapRate 12-15% sounds impressive, but we'll see if the numbers bear it out.

Also, how much is it really worth, today, as it sits?  

Free cash flow?

Is the area improving, declining or coasting?

More data, please.