52 Unit Apartment in Austin

[Adriel Hsu]

Came across an off market apartment deal in North Austin, can't decide if I should do my first multi at a C-class complex.

52 units, (26 1/1 units and 26 2/2 units). 2 story buildings built in 1969.  Pool, playground, property mgmt on site.

From P&L:
Gross Rent Income  - $492k
Gross Total Income - $554k

Total Expenses - $320k

The owners will sell at $2.5M

Researching the area, it's definitely not the nicest area of town, but it isn't the worst in Austin either. C class for sure, surrounded by other apartment complexes next door on either side.

It's in North Lamar area of Austin if anyone is a local and can give me insight.

The only thing that scares me is that it last traded in 2015, which is pretty recent.

Price per unit at $48k seems really low even for the not as hot parts of Austin.

Am i just being too scared? Sellers are asking for LOI

[Charles Kennedy]

@Adriel Hsu that 57% expense ratio is high too and sounds like it gives you some room to improve NOI. Typical apartments are around 40-45% so there is room for operational improvement. Try to identify what is causing that higher OPEX %.

The reviews on google for any apartment are always bad so don't give too much credit to those.

Other things to consider: Look at historicals, is it at an all time in terms of occupancy? Lower than normal? How does it compare to market? don't be afraid to call up apartments nearby and ask them what they are occupied at. I do it all the time for my day job (CRE lending). What is driving their other income of $62k? On-site washer/dryer? Fees? Pet rent? Make sure you understand these items.

Talk to seller's and try to understand why they want to sell. Ask about large CAPEX items and when they were last replaced. Call insurance brokers to see how their current rates compare to what you can get.

Feel free to PM me.