Help Me Analyze This 11 Unit Apt Deal
Hello all,
My biz partner and I are looking to jump into the multifamily space and have our eyes narrowed down to a particular market and a few properties in mind. I'm not saying that this is the property we're going with, but we do like it. I'd love to hear what anyone's thoughts are regarding the numbers and details. It's located in a college town where consistent rent is almost guaranteed, large student population. Building is in OK shape, some decent room to the increase value and rents.
Sales Price is $1.1M w/little negotiation room. If seller stays firm at $1.1M I'll ask for a $50k seller credit for rehab costs.
11 units and 1 office/1BR - A few units have back deck balconies (each is a 2BR and 2BA and includes a washer and dryer, which is unbelievable for that town).
Currently renting way under market. Based on comps, rents can be increased to $1,000-$1,200 per unit after rehab.
Rehab: It needs an estimate of $50k-$60k of TLC (re-staining the decks/replacing planks, modestly updating a few of the kitchens, replace floors/carpets for a few units, repainting parking lot, converting an office into a 1BR). Most kitchen cabinets won't need to be replaced, a dark wood stain and fresh knobs will look great. A few bedrooms have ugly carpet that we'll replace w/wood laminate. It's a neglected building that has potential IMO.
Lender gave us an estimated rate w/monthly payment of $6,350-500 w/PITI (+$500 per/month property management)
Cap rate ranges between 4.36%-6.76%. The latter being the best and former the worst scenario. If we include the 1BR we plan to convert which could be an extra 650-800 per/month, bringing the cap rate up to 7.5% and monthly cashflow of $6,500.
This is our first commercial multifamily deal and much larger than our past experience, am I forgetting anything? Does anyone have fears investing in a college town? Any feedback would be greatly appreciated.