Updated almost 10 years ago on . Most recent reply
Advice on purchasing an apartment building
Hello. I am a somewhat experienced investor who owns a few rental properties in different cities. I have been primarily focusing on single family homes in the 3/2 1400-1800sqft category. I've been interested in getting into multi-family investing and recently found a 25 unit building at a very reasonable price. The cap rate is about 12 percent. The property is in need of upgrades inside and out (Though I haven't done a thorough inspection) and isn't in the greatest location. It's at about 90 percent occupancy.
I feel that the area is an up and coming location and that the landlord is probably not charging enough for rent (I'm sure I could charge more, with some upgrades). On the outside, it sound like a good deal but the price seems too good to be true. The owner is even up for seller financing. My problem is, I don't know the first thing about valuing this property. I want to talk to the seller and do a walk through but what questions do I ask? What am I looking for? The building is listed for 500k. I planned on doing commercial financing with 25% down, but what would a decently structured LC look like?
Most Popular Reply
With multifamily the valuation is completely based upon the numbers. If the building is in need of repairs and the rents are low, there is a great opportunity to create value. Find out all of the existing rent and expenses, and talk to a commercial lender in your area who can explain to you how they will look at the deal. Good luck!