Looking for some advice
Im a light dabbler in real estate. Looking to move up to commerical. Thanks everyone for previous help. I have enough capital to get this property with no loan required. 600,000+ capital. Also 20% reserves for capital expenditures and enough additionally to cover 6 months with 0% cash flow before dipping into my 20% reserves would be required.
Im looking at buying a 36 multifamily plex just wanted someone to double check my numbers 1st before taking the plunge. Owner has land and units listed for 199,999$ total.
36 Units in 9 buildings, originally built 1963. 0% occupancy right now. average rent for area is $550 per this type of unit. I confirmed the rent myself.
Previous owner posted an estimate and got an estimate from a group on what the rehab would cost:
400,000 total with each unit metered separetely for water, gas and electric
I will have my own group come in and get an estimate on what they will charge, but using the 400K right now as rough estimate. They expect taking 6 months for the renovation.
his is the owners accouting of what he thought income/expenses would run:
projected income
36 2 bedrooms x $550/month = 237600 per year
minus 8% loss rent 19008 per year
total income 218,592 per year
projected expenses
taxes: 21988 per year
insurance: 10000 per year
maintenance/supplies: 12000 per year
legal/administrative: 3000 per year
salaries: 20000 per year
Misc. expenses: 10000 per year
Reserves: 36000 per year
Utilities: 6500 per year
Management Fee: 36000 per year
Total expenses: 155488 per year
Net operating income: 63104 per year
think the projected expenses are way high. 36K for management....i thought closer to 5% was normal for this type of project. I am thinking expenses maybe closer to 120,000 tops per year. which would put me around 100,000 noi per year. Seems too good to be true. What am i missing?