I'm considering making an offer on a 12 unit (would be my first RE purchase)with the following characteristics:
Asking price: $585,000
GOI: 95,940
NOI: 50,910
12 2bd 1ba units with rents ranging from 425-595, two of the units are corporate rentals all utilities included and rent at 1,010 and 1,320.
Built in 1985
New roof in 2005
Low maintenance exterior
No common areas
100% occupied
Nice quiet small village area.
Washer dryer hookups in units, not sure how many have them installed
Off street outdoor parking lot
Tenants pay own utilities
Comparable nearby apartment complex with very similar layouts, size and finishes (but with covered garage parking for one car for each unit - snow belt area) rents for $750+. Also, the the target building has electric heat which is more expensive than gas and could also account for rent difference. But it still seems rents are below market. I also think expenses could be trimmed.
Building could use some cosmetic updates.
Thoughts on a good offer price? At asking it is about an 8.7% cap rate based on the pro forma.
I'm thinking the corporate rentals should be discounted somewhat as they are way above market even after factoring in the included utilities so if the building loses those leases those units will be back at market rate.
Thanks in advance for any help.
