40 Unit Multifamily Deal Analysis

[Erik Anderson]

Howdy,

I am in the infancy of my Investing career with a 10 year background in Multi Family Housing Management. 

I have a deal I am looking at and would love some discussion with anyone willing to lend eyes or that would be interested in investing. 

I will start with the 2019 P&L YTD dated 12/4/19. I have included an average of the 11 month period to make the numbers below a full T12 of numbers.

40 2x1 Units

Average in place rents: $1278.00 

Total Income: $657,819

Total Operating Expenses: $226,888

NOI: $430,931

Cap Rate assumption: 5%

Asking price on the market: $8,950,000 

Items that stand out: 

 - I know this local market very well and feel strongly that rents could top $1700 per unit with additional utility bill back. I am thinking $500 over current rents/fees is achievable in a few years. 

- This building is also in an area that will have a newly completed public transit train within walking distance. Should be operational in 2 years. 

- There is a lender required Flood insurance on the P&L, $30K annually. Could this be reduced based on a new lender? 

- Management fees are listed at around 8%. With the right group on the building, fees could easily be reduced. 

- There are no Payroll expenses. Management company must only get paid through their Management fee. 

- Covid has restricted rent growth here since March of 2020 and removed the ability to charge late fees. 

- It has been on the market for over 300 days. 

I am going to tour the property in the next few days. They have 2 vacants that can be seen right now. Both are listed at $1300 

What do you think, is this a deal? I know the $8,950,000 asking is high. 

My largest obstacle is understanding what kind of loan I could get on this. With no debt service, monthly cash is around $35K .

Any input would be amazing. 

Thanks, 

Erik