Hi all,
New to multi-family apartment. I need some help evaluating a potential multi-family. 24 unit in 1 building apartments in North Carolina. Currently 100% occupied. Looks like shared expenses for electricity, sewer/water and internet/cable. It is right across the street from a university.
Thank you very much in advance!!!
Here are the details. They are asking for $1.4M
Income
2016 Numbers $210k Gross income + 7k Other income = Total income $217K
Expenses:
2016 Utilities - $61k
2016 Maintenance - $10k
2016 Turn costs (seem high but it is located near a University) - $7k
2016 Rental Operating Costs (advertising, court, credit checks, Public Relations??) - $7k
2016 Insurance: $8K
2016 Property Management Fees: $11K
2016 Office Expenses (Phones, answering service, admin, computer cost, software fee ???) - $3k
Then they add some more weird stuff..
2016 Labor expense (Payroll Labor, work comp, employee benefits, etc) $21k
Total Operating Expenses: $129K
2016 Taxes - $27K
Total Expenses: $156K
NOI = $61K
I know you don't add the mortgage but do I include the taxes in the cap rate? So cap rate is 4.35%, right? Low, right?
Seems like at this price point putting 30% down and getting a mortgage for $980k @5% (assumed) gives me a P+I of $5k or $60k annually which barely covers the NOI. Unless we are paying cash or getting a significant reduction in price it doesn't seem worth it right? 2017 rents have gone up about 6% but still not quite seeing the opportunity on this one.
Also it seems those expenses are out of hand, maybe the management company is running their office numbers through the building?
I haven't seen the property but would definitely separately meter the units if we did go through with it.
Thanks again!
