Updated over 7 years ago on . Most recent reply
Please Help Anaylze My First Apartment Deal
Hello BP,
I have an apartment opportunity that I’m carefully considering. This is my very first apartment/commercial property deal and I would greatly appreciate any help with the deal/analysis as I definitely do not want to make critical mistakes with any of it and in trying to decide a price to offer that makes sense with all the variables considered. I’ve also read many forum posts/articles and videos in preparation. The breakdown is as follows:
Commercial Loan Terms: 5.5%, 25 yr amortization with 25% down.
Asking Price: $399,000
Location: Great Midwest downtown area within biking distance to a very large university.
10 units - All 1 bedroom (5 units in each of the two identical 2 story, side by side buildings) and 9 are currently occupied. 10th unit requires reno before being rent ready. It’s currently used for owner’s storage.
Rent Breakdown: 2 x $525, 1 x $450, 2 x $475, 2 x $495, 1 x $500, 1 x $600, (last unit is vacant). Median rent for this area is $600 for 1 bedroom apts. So rents can obviously be raised to market level. There are currently 3 long-term tenants.
Building Info: Great condition 5,440 sq ft on 6,970 sq ft lot, built in 1916, new roofs 2017, new gutters, soffits, and windows on both buildings, one building has a new water heater & boiler, the other has new electrical panels. Both buildings have one set of new coin operated washer/dryers but more can be added to accommodate the amount of tenants, thus increasing laundry revenue. All units have 2 A/C window units each and screened in porches. Separate electric meters for all units. However, gas and water are currently not sub-metered. Current owner pays for water, trash, and gas with general rental proceeds. Here are the other metrics from the broker (that I will definitely verify myself during due diligence) as follows:
| Heating Fuel | Natural Gas | Cooling | Window Unit |
| Cooling Fuel | Electric | Annual Pot. Rent | $53880.00 |
| Vacancy Allowance | $2694.00 (5%) | Effect. Annual Rent | $51186.00 |
| Annual Laundry Inc. | $1200.00 (Est @ $100/month) | Gross Operating Inc. | $52386.00 |
| Net Operating Income | $32155.00 | Real Estate Taxes | $3268.00 |
| Building Insurance | $3041.00 (Estimated) | Management Services | $5000.00 |
| Maintenance | $2694.00 (5%) | Electricity | $1100.00 (Based on LES monthly avg for buildings) |
| Gas | $2328.00 (Based on BHE monthly avg for buildings) | Water/Sewer | $1800.00 |
| Trash Service | $1000.00 | Total Ann Owner Exp | $16963.00 |