First Deal - Look Good?

[Billy W.]

Hi Everyone,

I am looking to get my first deal going.

How does this look?

Non MLS 8 Unit Apartment Building

Asking Price: $199,000
Rent: Full occupancy, $360-375 each - Market will go up to $390. All 1 bedrooms.
Building is in good condition.

Any advice?

Thanks

[Jon Holdman]

These rents are too low for the 2% rule to be valid. Using Bryan's NOI figure, which is $1440 a month, and assuming 20 year, 7% financing, break even is $185K. If you want to extract $100/unit/month from that $1440 you're left with only $640 a month for the payment, which gives a value of $88K with those numbers.

The low rent is a killer, IMHO. You're dealing with a tenant for $360 a month. Call me biased, but I suspect they won't exactly be the best tenants. If you want a cut of that after expenses, your price has to be really low.