48 unit seller willing to carry back 18%

[Luke M.]

48 unit apartment complex located in a C neighborhood. 44 2 bedrooms and 4 1 bedrooms. 3 of the roofs are brand new and one needs to be replaced. 

Common areas of the buildings have been all updated 2014 

seller bought in 2012 for very close to $2.1 and that is what he will sell them to me under contract. 

Loan amount will be $1,722,000 (not exactly sure on the rate yet, finding out) 

seller will carry back $378,000 at 3.5 for 10 years at $3,738 

Rent income/total income   324,060

Expense 

Advertising   $390.00

Insurance $31,200.00

Real Estate Tax 49,440

Repairs & Maintenance 13,312

Utilities 17,236.84 

Total  111,189.03 

Net Income 212870.97 

I am not sure on the vacancy rate. I am meeting with him Thursday to discuss some more details..

Without some main components can I get some thoughts/advice on this deal?

[Joel Owens]

Are you local to this property? You will be buying yourself a job.

I do not believe those net numbers. Does the seller pay any utilities for the tenants or bill backs? Assuming rents are market and not inflated with no waiving of security deposit or first months free then net without immediate capex might be somewhere around 145,827.

That would be around an 7 cap for a C property if you are evaluating properly and it's not really a D at 2,100,000. This is just not a deal for that property type.

What have the numbers been for the last 3 years ( trailing 36 )? You want to see how many tenants have stayed and paid on time and how volatile occupancy has been. The more units turn and burn the higher the repairs and the less cash flow.

If local and you can get non-recourse and walk away if it doesn't work out then maybe you would at least get an education out of it for your time. If you have to put any considerable money in with recourse it sounds like a money pit where you will buy yourself a job and put any little cash flow back into the property. If this property is so great the seller wouldn't be selling it for what they originally had in it. Sounds like they have a big headache and want to unload that burden on someone else.