104 unit deal walkthrough

[Joseph P.]

Ok so let me start of by saying that I'm know to investing and I have never posted on BP before so here is to getting started. Lately I have been learning about Multifamily investing and trying to read up and run numbers and learn stuff and ran across a deal and I wanted to posted it hear just to hear feed back and see what things are off on the deal. Also just would like to hear ideas about other things to increase NOI if the number were right. Thanks for any help I get on this. Here is the info posted and what I have found out about the deal.

This is a 2 year old finished and completely occupied 104 unit apartment complex stating 100% occupied. 

There is an small exercise facility and tanning beds that are open 24/7, as well as a swimming pool and clubhouse with a coin laundry facilities. Each unit also has washer/dryer hookups. On-site Maintenance.

Unit breakdown:

16 - 1 bed/ 1 bath --- $600 month a year lease, $650 month w/6 month lease and $700 month

72 - 2 bed / 2 bath --- $700 month a year lease, $750 month w/6 month lease and $800 month

16 - 3 bed / 2 bath --- $800 month a year lease, $850 month w/6 month lease and $900 month

Deposit same as lease and Pets have $500 deposit for 1st and $250 for 2nd with 2 limit max and 30lb max

Numbers breakdown that are provided (assuming not actual number)

Acquisition Costs

Purchase Price, Points and Closing Costs $8,944,500

Investment - Cash $1,824,500

First Loan $7,120,000

Investment Information

Purchase Price $8,900,000

Price per Unit $85,577

Income per Unit $8,618

Expenses per Unit ($2,229)

Income, Expenses & Cash Flow

Gross Scheduled Income $896,255

Total Vacancy and Credits ($8,736)

Operating Expenses ($231,861)

Net Operating Income $655,658

Debt Service ($529,074)

Cash Flow Before Taxes $126,584

Financial Indicators

Cash on Cash Return Before Taxes 6.94%

Debt Coverage Ratio 1.24

Capitalization Rate 7.37%

Gross Rent Multiplier 9.93

Operating Expense Ratio 26.12%

ANNUALIZED INCOME

Description                                               Actual               Market

Gross Potential Rent                              $873,600         $873,600

Less: Vacancy                                         ($8,736)              $0

Misc. Income                                          $22,655        $271,856

Effective Gross Income                          $887,519     $1,145,456

Less: Expenses                                      ($231,861)    ($231,861)

Net Operating Income                           $655,658        $913,595

Debt Service                                           ($529,074)     ($529,074)

Net Cash Flow after Debt Service          $126,584        $384,521

Principal Reduction                                 $230,938       $230,938

Total Return                                            $357,522        $615,459

ANNUALIZED EXPENSES

 Description                           Actual

Taxes                                   $67,380

Advertising                           $3,527

Building Insurance               $29,864

Office Supplies                     $1,596

Grounds Maintenance          $8,400

Janitorial                              $8,568

Maintenance                       $23,509

Security                                    $675

Taxes - Payroll                    $74,926

Utilities                                $13,418

Total Expenses                  $231,861

Expenses Per RSF            $231,860.87

Expenses Per Unit                $2,229

B class stating 7.37% cap rate

My questions are

1. Is the expenenses at 26% to low? I know they don't show property manager and its very new

2. Would you charge extra per month for the tanning beds they have or shut that down.

3. Is it better to charge a extra $25 per month for dogs or have a pet deposit. I would think per month so you don't have to give it back and it increases NOI

4. I know they have a small coined laundry beside that what is would increase NOI. I was thinking charging for tanning, pet fee, washer/dryer package, maybe cover parking, VIP trash pickup.

5.  Would you still take $100 off for 1 year lease options and $50 off 6 month or set it up a different way.

6. What is average property manager fee for a place this big.

7.  Good deal or needs some work