Apartment Building- Purchase Price?

Question

Vacant

Projected Gross Monthly Income: 24,000

Cap Rate 7.5%

Repair Costs: $300,00

Good Location, on site laundry and storage.

Has anyone sub metered electric and water and what is estimated cost and any information you can offer.

Sewer: $8,400/year

Electric Common area: $12,000/year

Insurance:$12,000 year?

Taxes: $40,000 year

Water: $9,600 year

Steve Wilcox · Answer

sub metering electric typically involves rewiring a significant portion or all of the building which also means your walls will be like swiss cheese. Now you will also need to insulate and drywall, and if its an old building odds are you will discover tons of plumbing and framing issues once you open up the walls and see whats inside.

You already named your purchase price if you are willing to pay a 7.5 cap. that seems really low to buy a totally vacant building unless you are including all your rehab, leasing commissions, ect into your price.

Ken P. · Answer

Christopher, for a large investment like the one you're contemplating, I'd recommending going to Michael Blanc's site themichaelblanc.com and paying for his apartment building calculator.  It's small potatoes in the big scheme of things, and it will help make sure you don't miss anything.  You'll need the resulting numbers for any serious discussions with possible investor partners.

Are you working with an experienced investor from your local REIA?  If not, another recommendation is to join a BiggerPockets local meet up and find someone active in the multifamily space who can walk beside you during your first deal.

Leo B. · Answer

I'm still learning about apartment complex investing here.  Isn't value also dependent on the going CAP rate of the area?  Is there an online source for average CAP rates in cities throughout the US?

Rob Beland · Answer

We need a LOT more detail @Christopher Ilvento. How many units? Where do those expense numbers come from? Submetering electric is typically a nightmare. How big is the building? You could be around $2M hopefully less ($1.6M - $1.7M) depending on the accuracy of those repair estimates and expenses. Dont forget PM fees of around 10% to be safe plus 5% for general repairs/maintenance, vacancy factor (8%). You also need reserves to get it leased up (6 months at least). What else can you give us?

Account Closed · Answer

$3,250,000