12 Unit MFH Deal, 2 units to be added

[Michael Kay]

Hi!

I found this great little deal of an apartment building in a major metro area. I figure the units are renting for $2300 each (it's in my neighborhood), down the street from me). 

Building's cap rate is 4% which is the normal for the area. Total deal is around three and a half million. I don't know what the status of the plans (other than 'approved') or the 2 extra units that are proposed to be built.

If I'm understanding things correctly, those two extra apartments will bring in $2300 * 2 per month  * 12 per year/ 4% should give us $1.3MM extra value? 

[Tim Herman]

@Michael Kay So you are saying you will net $2300 per unit, You add the two units taxes will go up, insurance will go up,expenses will go up. Adding the two units is not pure profit.  You have to add net operating income, not gross income to get added value.