Helicopter Pilot · Fairbanks, AK · Member since 2015 · 29 posts · 6 votes
What should I expect for Cap rate c class multi-family in Fairbanks, AK?
I am trying to set my value for a 6 unit property that should rent for $6000-6900 but is currently only renting around $4900 as one of the unit is getting remodeling. The property has been well cared for but under managed for some time. It has a long history of a least one unit vacant in the past few years(not market driven). The building was new in 1975 and has some updated throughout but it does not show as new and current. Boiler is around 12 years old. Owner is open the lease option or owner finance.
-I am calculating cap rate at 10.5%
-Cash flow $1300ish (rent dependent proforma)
-utilities avg $1000-2000 throughout the year
-asking price is $365k
Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
10y
Use the existing rents for evaluation - - they're real and all your marketing may not yield improvements.
If there's known vacancy issues, then adjust the the GSI (sum off all rents * 12 months) and subtract the loss rents from vacancies (number of units vacant * average rents * number of months their empty) . Call that your NET SCHEDULED INCOME and resume your evaluation.
Investor · Fairbanks, AK · Member since 2015 · 12 posts · 3 votes
10y
@Trevor Burns I don't know if you're working with a Realtor or not, but they can pull reports for the last 10 years on what sold and what it sold for. I would go see one and have them run a report on all comps in the last 10 years to get an average sales price. As far as average cap rates in Fairbanks, I have seen several 6plexes on the MLS in the last 6 months offered at a 12-14% cap.
Due to the age and size I am guessing that it is on the south side of Fairbanks. Depending on the size of the units, I think $365k is about the peak of our market for something of that age in that area. Unless there is a lot of value add, but it sounds like they have already remodeled so there probably isn't a lot. Most of the 6plex I have seen have sold around 45k-50k a door. Thus it doesn't sound like a "deal" to me. Sounds like he is trying to sell for an inflated "bank equity" based value as apposed to its true intrinsic value. But maybe its worth it to you if you don't have 25% cash to put down and/or can't attain traditional financing?
As always I think it just comes down to your strategy and lifestyle.