multifamily 6 units

[Essam Elkady]

Hi Guys I always hear about cap rates of 10 percent or more in multifamily I really do not know what you guys talk about Iam from springfield missouri here is the best deal we have
Asking price 359000 may be will sell for 330000$
6 units 4 of them 2 bed 2 bath and 2 units 1 bed 1 bath
monthly total gross rent 2900$ It is very easy to rent ,real nice area class A ,the building is B though built in 1988 but brick and nice building

Expenses monthly 280$ taxes,200$ insurance,250$ utilities just water and sewer maintenance I would say 300 $.management another 300$,CAPEX 250$,vacancy 200$
Cap rate around 4 -5 percent so what are the numbers I hear here at BB ,that is the best building I have seen so far

[Arlan Potter]

it appears to me the biggest problem with this complex is that the rents are amazingly low. Your gross rents should be at least $4500.00 per month. Why so low. The current gross rent is less than 1%/month

[Essam Elkady]

springfield missouri rents are not high ,the property taxes are not high so rents are low ,that gross rent is the best that can be acheived in the area the 2 bed room 2 bath single house in nice area rent for 600$ ,so for apartment we can not ask more than 500$
what you guys think will be fair price for this complex based on the numbers

[Arlan Potter]

$180,000. Based on the rents available.

[Essam Elkady]

Thanks Arlan so hopefully no sound investor will touch it at this price I will keep an eye may be they will come down with the price

[Arlan Potter]

There is no reason to pay too much, if it is not a deal, then wait. Most sellers have too high an opinion of their property. If the rents are actually no better than $500 then they have to come down or some sucker will buy it too high. It may be that a reasonable price is $240 or something, but nowhere near $360. No money in it for you.

[James Syed]

Welcome to BP. 

Not a good deal at all. 

I agree with @Arlan Potter. It appears to be $180,000 would be the price based SOLELY on rent. 

Hope it helps.

[Essam Elkady]

it was sold for 330000$ I do not know what is going on with multi family it is so hot now

[James Syed]

@Essam Elkady

WOW! Not good buy for cash flow, but might be good one for appreciation. 

I personally invest for cash flow. 

Hope it helps.

[Jeff B.]

Originally posted by @Essam Elkady:

springfield missouri rents are not high ,the property taxes are not high so rents are low ,that gross rent is the best that can be acheived in the area the 2 bed room 2 bath single house in nice area rent for 600$ ,so for apartment we can not ask more than 500$

GOOD. This is the FMR and at least you have that in hand. P*** on the 1% 'rule', Your NOI should be your guide. If the financing drives the mortgage into eating all the GSI, then this is not and investment opportunity. Understanding NOI will help you make profitable investments.