Is This a Good Deal?

[B.J. Simpson]

I know this isn't a great deal but curious everyone's thoughts on how far away this would be from being a good deal?

- Broker pocket listing

- 20 1BR apts 678 sqft/each in 3 buildings

- C area close to downtown but not in path of downtown rejuvenation in a growing city of 200k+

- B class brick buildings, built in 1983 and well taken care of

- NOI $81k

- near 100% occupancy

- near market rents

- they are asking $850k (9.4% CAP)

- full asking price CoC return would be 14%, $106/door cash flow

No real glaring value add opportunities, curious from the experts at what price this is a deal? Thanks a bunch!

[Kathy Utiss]

I agree with Eric. People use this method not knowing how to break it down. Tell me what you want here's what I consider a good way to see if a property is worth going forward on 

850,000/360=$2361 PRIN

850,000X.05=$3,541 Interest

                    $6,750 Net Pymt not including insurance, repairs, or maintenance at $81,000 a year it's $845x12=$10,140. 

Granted you may get a better interest rate. However, even with a better interest rate there's next to nothing left! I'm just curious are you sure those are the right numbers? 20x$700 makes $168,000 gross a year before deductions. I know some places have low rent prices depending on where the property is located but less than $700 usually isn't found in todays rental world.