How much would you bid for this apartment complex?

[Jimmy Moncrief]

Hey guys (and gals) I would love your input on this apartment complex I'm looking at.

It might possibly need a new roof in the next couple of years.

Here is the data:

Gross actual rent: $250,864

All expenses (not interest or depreciation) was $134,172

The owner is required to pay the water bill which was a nice: $29,343

Taxes were also a nice: $23,520.

If I assume debt of $1.1 mm at 5% for a 20-year amortization I get $87,120 in debt service.

So this is my math:

Gross actual rent: $250,864

All expenses (not interest or depreciation) was $134,172

Debt Service: $87,120

Net Cash Flow: $29,572

Debt Service Coverage would be 1.34

[Aaron Montague]

@Jimmy Moncrief

Short Answer:

Start at 550k and be willing to pay 650k

Longer Answer:

I get the same number that you do, but I don't see a management fee, cap ex or vacancy expense in the calculations anywhere.

With an 8% management fee and a 6% vacancy expense I see this place losing you about $460/month.

I have no idea how much your cap ex costs will be, but I would imagine a place like this probably has a roof that costs 15k or more to replace. I would budget another $500/month for that.

With those numbers, I see your direct assumption of 1.1M in debt costing you alsmost $1000/month.

At 650k you'll see about 2k/month in cash flow. The ROI isn't relevant because you aren't putting any money down outside of the closing costs. I figured them at 12k, which does give you an ROI of 200%. Not a good number to base this deal on however.