45 Unit Phoenix Apartment Complex

[Nic A.]

Hi all, this is my first apartment complex and I am looking to do ground up construction. My business partner and I are acquiring 1 acre of property near Arcadia for about $1.2 million. We have closed on 1/3 of it so far and the other two sellers are down to sell.

Build 22 one bed one bath units and 23 two bed two bath apartments that are 500sq ft or 750 sq ft. 28250 sq ft total

Rough numbers @ $125/sq ft * 28k sq ft = build out of $3.5mm. Lets round up to a total of $5 Million in A&D, costs, etc.

Rent for 1 bed in the area averages about 1100, 2 bed is 1500. Gross Income (1100*22) 24,200+(1500*23)34,500 =58,700*.98 (2% vacancy) = $690k. In the area I have seen 15% expense factor rates on C class buildings. Lets go 20% for conservative numbers and cap rates are about 5% on C class properties as well. Ill use 6% for conservative estimates.

Mine will be an A property since its a new build in a B class area. So the math is 690k*.8/.06=$9.2mm valuation or what I can potentially sell for.

Is this math correct?