Looking at a 12 unit apartment complex in Boardman, OH. Financials below:
2018 - Rent Income --> $119,000 Expenses --> $36,200 NOI --> $82,800
2017 - Rent Income --> $103,000 Expenses --> $63,700 (31k spent on upgrade repairs this year) NOI --> $39,300
The owner told me he is taking offers on the property and did not give me an asking price. Also, told me the Cap Rate for the area is around 8.15%-8.4%. Which seems kind of low.
First, @Nikko Giangiuli , you don't make an offer based on an owner's lump-sum numbers and HIS Cap Rate. You need to confirm the Cap Rate for the area and asset class with local brokers and lenders.
- 30% expenses on a 12 unit? Not ducking likely.
- $31k on "upgrade repairs" in 2017? Those are called Capital Expenditures and are not included when determining NOI.
- Rental income went up 15.5.% from 2017 to 2018? That's a big increase all at once, even with "upgrade repairs."
Bunch of red flags here. Ask the owner for complete T-12 and rent rolls with copies of the leases. He may not be willing to provide until you make an offer, which isn't unheard of. My bet is that actual expenses are closer to $54k/year. That gives you a NOI of $65k. At a 9% Cap Rate you're looking at a valuation ~$725k.
With those numbers you could cash flow ~$1800/month and see a CoC ROI just North of 11%. Is there opportunity to raise rents? Looks like you're averaging ~$825/month. Once you see the actual expenses, you'll be able to make some determinations on that end.
Appreciate the input, yeah the expenses sounded super low for how many units he has. He sent me his 2018 and 2017 end of the year balance sheets, but who knows if they were even real or not.