24 unit apt complex Class C

[Bab Adetiba]

16 (2/2) and 8 (1/1) units. I'm very familiar with the area

From P and L

Gross income: $145,000

Gross expense: $53,000

NOI: $92,000

Asking $1,000,000

Weird expenses are $0 for landscaping and $90 monthly for electric. That doesn't make much sense.  When I underwrite it, cap is 9.2%. The average cap in the area is 6-8%.

How do you account for cap ex? By having a separate cash cap ex reserve or accounting for 10% from your gross income?

I want to offer $850,000, 10% down and 7% interest seller financing. Is this standard rate? Also the Owner is out of state, and shoddy paperwork suggests poor management. Some value add opportunity on the place. I have a few single families but this is my first apartment deal. I will be sending over the LOI soon.

[Andrew Johnson]

Bab Adetiba Is gross income projected or collected? Either way, op-ex is low, suspiciously low. What (here’s where my sermonizing starts) I’d want to know is where you are from a capital perspective. If you want higher interest owner financing it’s usually because you don’t have 25% to put down for a commerical loan. There’s a good bet that there’s deferred maintenance so you have to think about what you’ll need per unit. You’ll also have to call consider that your opex could easily be closer to 40% or 50%. It looks like rents average circa $500/month. If I were a betting man, I’d guess that opex would be closer to 50% given a lot of expenses are fixed (lock change, carpet cleaning, owner paid utilities, appliance repair, just to name a few) regardless of a unit renting for $500/month or $800/month.

Bottom line: You’ll need cushion (read: money) for some degree of rehab and a higher opex.