I'm feeling very overwhelmed right now and need some guidance. I've been on BiggerPockets for a little over a year, just reading and listening to as much as possible. This site is amazing, and I've learned so much, but not enough to feel comfortable working a deal. I'm trying to put what I've learned into action, which is a little scary on my first possible deal. I've missed out on so many deals because I would just sit on the sideline and not take action, so now I'm ready to take action and try to do something about it. I've wanted to do this for a long time, but just didn't have the courage to do so. After reading some of the success stories, which finally motivated me to finally do something, I decided to run it by my wife. I asked her what she thought about me buying one rental, preferably a single family, to my surprise she said sure. I then told her that I'd like to have about 40 in the next 5 years, then she asked me if I'd lost my mind. Stay with me, I'm about to get to my original question. I recently found out about 2 apartment complexes that had been for sale, but for some reason the deal fell through. They haven't been put back on the market but I had a realtor friend to check on it for me and they're still for sale. This intrigued me because I had just watched some videos and read some blogs about apartments. I go back to my wife and tell her I found a way to get my 40 units at once. I just knew when I told her the price that she would throat punch me, but believe it or not, once I told her the numbers and my plan for financing it, she was on board again, last thing she told me was to not bankrupt us. So now to the numbers; these are two different apartment complexes within about 2 miles on each other, the owner is wanting to sell them together; these are being advertised as 45-turnkey units, 8.07% cap rate, 96% occupancy, List Price $1,750,000. Found an ad advertising a six month lease at $575 or a 12 month lease for $555. I figures are based on $550 a month. I'm trying to get my figures as close as possible because there is still some information that I waiting on.
I'm still not 100% sure what my offer will be, so I'm running these numbers on a price of $1,450,000. My plan is to bring my uncle in for the down payment, plus come of the closing costs, at $309,000. I would pay him back at 10% interest for 5 years @$6565 a month. Then finance the rest on a 30 year fixed @ 5%. We would form a LLC of some type. So the payment to the bank would be $5331.
Rent=$550
Taxes=$15
Insurance=$25
Vacancy=$55
Repairs=$10
Cap ex=$20
Property Management=$55, which I used 10% of rent
Mortgage=$118
Total Expenses=$298
Cash Flow=$252 per unit
If I calculated the ROI right, I came up with 45%, like I said, It may not be right.
Any feedback would be great, I tried to accurate with the number, I know the taxes were right, not sure about the insurance. I calculated it based on $250 per door. Insurance agent is supposed to get back with me tomorrow. Like I said earlier, if the numbers don't work out, I'll move on to the next one. My ROI seems high to me, that's the one that worries me the most, I may have miscalculated. One other thing, I supposed to be getting my questions up for the seller, I have several, but if there's some specifics that I need to ask please just let me know. I appreciate any and all the help I can get. Thank you
