@Jeremy Santy There isn't much info available on the listing to thoroughly evaluate the deal. You may want to gather the unit mix, size of the units, gross rents, and actual expenses from the listing agent to get a better sense of how the property may operate going forward.
In the absence of more detailed information, I made a few assumptions and shared my work below to give you a sense of what may be baked into the listing price. You can use this to determine whether the assumptions are realistic and determine where to probe further with the agent. For example: Is the advertised NOI of $36,000 achievable? Do the rents and expenses reflect reality? How long can this be sustained?
The first thing that jumps out to me with this deal is that the list price and cap rate suggest avg. rents of $800/month/unit. While the listing doesn't outline the unit mix, I assume all 7 units are studios given the location of the property. According to Retometer, the avg. rent in the area for studio apartments is ~$500/month/unit. Can the units in this complex realistically rent for $800/month/unit? If so, how long will they stay occupied? Studio apartments turn over frequently and cater to transient tenants, especially in this location. It's worth probing further here.
Additionally, the property is ~60 years old. A 50% expense ratio may be too low. It depends upon the recent renovations and age of key property infrastructure.
In general, based on the assumptions below and in the absence of more detailed information, it feels like the rent is overstated and the expenses are understated. Additionally, a small multiplex of studio apartments is not ideal given the transient nature of the tenants. These are just a few areas to consider as you evaluate whether this is a good deal or not. Ultimately, I think you need to gather more details from the listing agent to adequately evaluate the deal. Hope this helps.
Metric | Annual | Monthly | Per Unit/Month |
List Price: | $210,000 | - | - |
Derived NOI (16% Cap Rate * List Price): | $33,600 | $2,800 | $400 |
Derived Gross Rent Assuming 50% Expense Ratio: | $67,200 | $5,600 | $800 |
Derived Net Rent Assuming 5% Vacancy: | $63,840 | $5,320 | $760 |