12 unit Building Valuation

[James Syed]

Hello BP Members, 

I am interested in purchasing this 12 unit building and would appreciate if members could assist me with purchase price. It's an off market property and Seller has passed away and his family doesn't have any p&l for me. What I have is:

12 units @650 a unit

$12,000 taxes

Lawn care, trash, water and sewer paid by the landlord

Property management in this area is 10%

Electric is paid by the tenants 

Year Built is 1950 or so

That is all what I have been given. They are asking $630,000. 

I use biggerpockets calc when I have all the numbers, but in this case, I don't. 

I would appreciate if BP members could assist with purchase price, may be some formula / rule of thumb, etc.

[Joel Owens]

If 650 a unit is market rent or lower then might count it. Example market rent for 2 bed is 600 to 700 and they are using 650.

650 X 12 = 7,800 a month times 12 = 93,600 gross expected income

Back away with seller paid utility 55% costs for ( management, operational expenses, vacancy,etc.)

93,600 X .45 (55% expenses) = 42,120 NOI

42,120/660,000 = 6.69 cap rate. Unless current rents are hundreds of dollars or more per unit under market it seems overpriced.

A 10 cap is about 421,200 and that is before inspection results. You need with a 1950 building to look at lead based paint, galvanized plumbing, asbestos,etc.

Definitely scope the lines and check for water pressure. Make sure to check each unit for inspection. Sellers like to show the best 2 to 3 units and hide the worst ones.