what formula do i use for an apartment?

8 Replies

how do i make sure i would make money off it?

for example

price- 2.7million

12 units

8500 sq ft

225k per unit 

 property sub type - garden low rise .. whatever that means

cape rate it 5.5%

100% occupancy

buitl 1850

.19 lot size

A 5.5 cap rate would indicate a 148,500 noi (rev-exp not including debt service). Debt service 25% down will be around 119,500 leaving about 27,000 for capex. Say 300 per door or 36000.  This puts you about 9000 in the hole if it was truly a 5.5 cap.  Your cash on cash is deep in the negatives.

@Jeff Greenberg can you explain how you formulated the NOI based on the figures provided (2.7 with a 5.5% cap)?

@Anita Oakley ,

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@Jeff Greenberg Can you explain how you formulated the NOI based on the figures provided (2.7 with a 5.5%cap)?

@Anita Oakley  

(5.5%cap) .055*2,700,000=148,500 NOI

A 5.5 cap doesn't pay the bills unless you come in with a large down.  Then of course, the cash on cash takes a dump.

Investors buying at a 5.5 cap or lower are buying for several reasons IMHO.

1. Betting on appreciation

2. Capital preservation

3. Value add deal

4. Don't have a clue how to evaluate a property

5. Holding for loan pay off.

6. Need a loss to write off

Can anyone add anymore?

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