Deal or No Deal-14 unit apartment building

[Eric Haskell]

Deal or No Deal?

I found an off market property, reached out to the owners and they showed interest in potentially selling it.  Goal- a long term hold for the next 15-20 years.  

Large Cap Ex Items Done

regraded and paved driveway and all of parking lot

All new vinyl replacement windows

Vinyl siding on both buildings

Built: less than 35 years old

Garden Style, 2 Buildings, one is 6 units, one is 8 units(efficiency apartments)

I look for 10% 1st year roi based on 25% down and closing costs to buy property.

Current Income-90,000 (current owner assumes 15% vacancy rates to be safe)

Current Expenses-57,000( 2018)

I see a potential for income to be- 95-98,000 within next 18-24 months

Expenses-I calculated at 51,000 within next 2 years including the below metrics.

All trash removal costs, property taxes and insurance costs were factored in as well.

10% cap ex

11% M and R(turn overs were included in this figure and 1/2 months rent paid to prop. management company for screening new tenants and placing them)

6.5% current property management

I calculated my cash flow after paying mortgage and all the expenses was around 5,800$ per year. This equated to a 4% ROI for my 1st year.

Lowering some of the expenses like snow removal, landscaping, electricity bills and heating bills equated to a 12,000 per year cash flow or a 8% ROI.

If I raised rents 25$ per unit my ROI would go to 11-12%.

What is the highest price you would pay for a property like this?

C Class Apartment Building, half the units are efficiencies, other half are 2 bedrooms and 1 bedrooms, laundry on site, overall condition is average.

Property purchased for 500k in 2016.  I am having a hard time making this a deal even at 505k....