Apartment Complex offer Strategy

[Raj Vajir]

Hello BP friends,

I need some help on how to proceed in making an offer for an apartment complex.

I spoke to the lady (53) looking to sorta retire.  I approached her about selling and she said she is in the process of upgrading the units to sell them off individually at $80K/unit.  She has an entire new plot right on the same property to build same amount of units (1.4 acres total) and owns the adjacent lot with a hall (1.6 acres)., not included in this offer.  She wants to sell but I have a feeling she won't go for $35-$40K/unit price I had in mind.  She is divorced and does all the work herself with her boyfriend.  She's not in distress, just considering.

12 Units (Townhouses - 900sqft, 2bd)

Rents: $700 (can be raised up to 900), very few apts. in the town.

100K gross/year

Fully rented

City Appraisal at $630K

Willing to do seller finance as well.

I haven't asked for any numbers yet, but following the 50% rule, The numbers I come up with is 450K-550K to make some cash flow.

$500k offer

$100k down

$400k @ 5% ($20k/yr)

Leaves me about $25-$30k/year if I run it myself.  

Of course these are numbers on assumptions (50% rule + mortgage)

Please help me check my numbers to see if it even makes sense to proceed.

Raj