I see, not a traditional apartment building but still should be considered commercial. The biggest things that stick out to me are that the expenses seem to low as a whole. They are less than 20% of your gross income. For a quick rule of thumb I like to use 50% which includes a capex reserve. So a few thoughts:
-if expenses are conservatively estimated at 50% (includes property management and capex), that puts your NOI at about $25K, which using your 6% cap rate would value the property at around $417K.
-even if the expenses are actually at about 35% ($17,500), that would put the NOI at $32,500 and property value at about $542K
-I don't see any vacancy figures quoted, you need to estimate at least 5% (10% is better) vacancy which will also lower the NOI
-I would FOR SURE, get T12 ACTUAL expense numbers, don't just trust what they tell you
-Also, consider that even their last 12 months doesn't necessarily equate to what you will be spending on R&M and Capex, I would underwrite at a higher, more conservative number
-I think you will have a very hard time making this property cash flow at a $600K purchase price once you factor in your P&I payments...just a guess, I didn't run the numbers
Last thing. Just becasue you can improve the property, raise rents and increase your NOI...doesn't mean you should have to pay the seller for the work you are going to do. The seller should be paid on what the property is actually worth. No, they are not going to sell it for $417K but you need to figure out a price that is somewhere in between what it is actually worth based off of the numbers and what you can make it worth.
I have to run out now but if I can, I will try to plug in numbers and get back to you with more info/insight. If you can, please share your financing details/plans.
Scott
