40 apt building Cap Rate
Hi all.
I'm putting all the numbers for that deal on the chart, and I have a few question.
That's a full rehab property.
1. Is there any rule of thumb that I can use when estimating the expenses of this kind of renovation?
2. Does the added table make sense to you?
3. After putting
all the info here, how do I calculate the selling price (for a full occupied, steady building)
Thank you guys. I appreciate your support!
Lot of good resources to estimate potential costs. Talk to a local PM/GC in regards to your business plan and estimated costs (ie new cabinets, new flooring, etc). Also some free resources like Heritage Construction.
On sales price, you should estimate what future NOI will be and use your best estimate of submarket cap rate plus some expansion on that number to be conservative across a hold period.
Quote from @Brian Pownall:
Lot of good resources to estimate potential costs. Talk to a local PM/GC in regards to your business plan and estimated costs (ie new cabinets, new flooring, etc). Also some free resources like Heritage Construction.
On sales price, you should estimate what future NOI will be and use your best estimate of submarket cap rate plus some expansion on that number to be conservative across a hold period.
I have all the numbers on the attached table.
according to the equation, the sale price is the NOI / Cap rate, which doesn't make much sense bc it's lower than the purchase price.
So, I'm not sure what I do wrong here
Quote from @Dave Halevi:
Quote from @Brian Pownall:
Lot of good resources to estimate potential costs. Talk to a local PM/GC in regards to your business plan and estimated costs (ie new cabinets, new flooring, etc). Also some free resources like Heritage Construction.
On sales price, you should estimate what future NOI will be and use your best estimate of submarket cap rate plus some expansion on that number to be conservative across a hold period.
I have all the numbers on the attached table.
according to the equation, the sale price is the NOI / Cap rate, which doesn't make much sense bc it's lower than the purchase price.
So, I'm not sure what I do wrong here
This table doesnt tell us the whole story. If you assume that NOI will from at 3% a year and the cap rate states the same the sales price will be higher. Will need a few more figures to determine where your math went wrong.
Not sure I fully understand your answer.
what other info do you need there?
ty
Hi Dave! I would be happy to work with you to estimate the cost of a full rehab for this property. I may need some additional information so feel free to reach out and we can chat.
- Evernest
- (248) 920-9011
- https://www.evernest.co/
- [email protected]
Quote from @Dave Halevi:
Quote from @Brian Pownall:
Lot of good resources to estimate potential costs. Talk to a local PM/GC in regards to your business plan and estimated costs (ie new cabinets, new flooring, etc). Also some free resources like Heritage Construction.
On sales price, you should estimate what future NOI will be and use your best estimate of submarket cap rate plus some expansion on that number to be conservative across a hold period.
I have all the numbers on the attached table.
according to the equation, the sale price is the NOI / Cap rate, which doesn't make much sense bc it's lower than the purchase price.
So, I'm not sure what I do wrong here
I think you need to figure out the prevailing Cap rate in your market for this asset type to project your projected sale price. The property's current Cap rate is your go-in cap rate, that can vary from property to property based on its value-add potential, location, year-built, and many other factors