Apartment Building, need help with cap rate
Im looking at a beautiful 148 commercial apartment building. 21 million. Can someone give me the best way to get the cap rate, Im struggling with this one. :roll: Want to see if its going to be a good investment.
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Okay this is a lot to ask for considering you also want to know the proforma cap rate as well. But we are not going to be able to do that with all the details of the commercial property itself. We need to know what each unit consits of (ex: 1bd/1ba/700sqft) and what competitive rents are going for. And remember just because units have the same bed, bath and square footage does not mean it is a solid comparable. Also you will need to determine the vacancy ration of the building itself and if there are lease agreements find out the terms of each lease. And last but not least you have to determine your LTV for most commercial lenders will require that you put 30% down.
Lets see 148 units; we will say that they are all 2bd 1ba with 800sqft of living space and all units are going for $2250.00 a month. And lets say that you have all 148 units leased out for the next three years. That will come to a grand total of $333,000 a month minus you expenses of maintaing the building itself. Your payments on the loan itself will be roughly $185,122.48 with a 30% down payment, which will leave you with $147,877.52.
You will also have to consider the utilities that have to be paid on the building and your CAM charges as well. So this is why it is vey hard to determine what the cap rate will be as far as what you gave us.
Please come back with some more details and we will see what we can do to try and help you out, thank you for your time my friend!