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Multi-Family and Apartment Investing

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Dave Halevi
  • Investor
  • Michigan
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40 apt building Cap Rate

Dave Halevi
  • Investor
  • Michigan
Posted Apr 11 2022, 20:45

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!

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Brian Pownall
  • Investor
  • Houston, TX
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Brian Pownall
  • Investor
  • Houston, TX
Replied Apr 12 2022, 03:57

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.

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Dave Halevi
  • Investor
  • Michigan
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Dave Halevi
  • Investor
  • Michigan
Replied Apr 12 2022, 10:18
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 

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Michael Johnson
  • Investor
  • San Diego, CA
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Michael Johnson
  • Investor
  • San Diego, CA
Replied Apr 26 2022, 20:40
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.

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Dave Halevi
  • Investor
  • Michigan
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Dave Halevi
  • Investor
  • Michigan
Replied Apr 26 2022, 21:29

Not sure I fully understand your answer.

what other info do you need there?

ty 

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Josie Brown
Pro Member
  • Detroit, MI
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Josie Brown
Pro Member
  • Detroit, MI
Replied May 23 2022, 08:50

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.

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Vince Liu
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Vince Liu
Pro Member
Replied May 24 2022, 07:49
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