The fact is that throughout the Unites States, operating expenses run 45% to 50% of gross rents.

I would strongly suggest that you learn about operating expenses and cash flow BEFORE you buy anything.

Don't let yourself get scattered, it is really easy to be snowed if you do not understand the market within which you plan to operate.

Furthermore, you stated: I would not do it because of the potential liability for my client and myself is too high.You are certainly entitled to your opinion and how you operate, but that again is in defense of an agent.

That is just not the reality and if you choose to ignore the other expenses, they will bite you smack in the face once you own it and then the reality will set in that you overpayed.Using the most liberal operating expense ratio possible (37%), your annual NOI is $128,520 and at a 10 cap, makes your best offer $1.285 million (which I would not pay that much personally as I believe you would be overpaying)

I think the biggest problem would be coming up with the 20% needed to make these numbers work.Purchase Price:$2,350,000Property type: 72 unit ApartmentYear Built: 1970Rentable Area: 58,211 sq ftLot Size:: 124,823 sq ftCurrent Occupancy: 89.19%Purchase Price: $2,350,000Assignment Fee1: $100,000Cap Rate2: 10.77%Net Operating Income3: $253,078.29Pre-tax Cash-flow4: $102,986.01Earnest Money Deposit5: $21,500Down Payment: $470,000Loan Amount: $1,880,000Amortization Period: 30 yearsInterest Rate: 7%Mortgage: $12,507.69Loan To Value Ratio: 80%Debt Coverage Ratio: 1.5044Unit Mix: 24 1/1.5, 47 2/2, and 1 3/2Scenario A:You'll purchase the property at a 10.77% cap rate (based upon his actual numbers), DCR of 1.6862 (assuming you get financing at 80% LTV with 7% APR); and you should receive an annual pre-tax cash-flow of at least $102,986.Scenario B:You could increase your cap rate to 12.1%, your DCR to 1.8949, and the yield of your annual pre-tax cash-flow by nearly $32K simply by reducing your vacancies and collections (from nearly 11%) to 5% of the gross rents (which is the norm for that area—so it's doable).

So I'm running the numbers on a property that I found, and I'm trying to see if they make sense to you guys...Assumed:30 Year Fixed Rate @ 7%Loan Amount: $25,000 Monthly AnnuallyINCOMEGross Income $ 850 $ 10,200Vacancy $ 50 $ 600Net Income $ 800 $ 9,600EXPENSESProperty Taxes $ 225.16 $ 2,702Insurance $ 33 $ 400Maintenance $ 100 $ 1,200Net Expenses $ 368.16 $ 4,302NET OPERATING INCOME$ 5,298Mortgage $ 166.32 $ 1,995.84CASH FLOW $3,302.16

They may not operate in Buffalo, but check out the podcast.

The language is weird as well, as the email states: each self-directed IRA LLC is required to have a transaction reviewer, as per article 2 of your LLC Operating Agreement.

People make estimates for cap ex, operating, taxes, insurance, utilities, etc.