Buying 10 units. Analysis
Ok so I have been doing a lot of research and im a bit confused by the process of purchasing a commercial apartment building. Here is the breakdown.
| Price | $700,000 | Cap Rate | 11% |
| No. Units | 10 | Occupancy | 100% |
| Building Size | 10,435 SF | No. Stories | 4 |
| Price/Unit | $70,000 | Year Built | 1920 |
| Property Type | Multifamily | Lot Size | 5,419 SF |
| Description | No. Units | Avg. Mo. Rent |
| (4) Units at $900/mo each | 4 | $900 |
| (3) Units at $700/mo each | 3 | $700 |
| (2) Units at $800/mo each | 2 | $800 |
| Unit at $600/mo | 1 | $600 |
Financial Summary (Actual)
| Scheduled Gross Income | $94,800 | Net Operating Income | $71,986 |
| Operating Expenses | $22,814 |
So please let me know if im looking at this right. NOI 71,986 cap rate of 11% = Value of 654,419? This is NOI divided by cap rate for Value Now I havent done the research yet to see what buildings in the area are trading at but just using the numbers given. Cash on Cash based on a 600,000 purchase price with 20% down of 120,000. So loan of 480,000. Mortgage payment of 2600k a month based on 30yr 5% Expenses of 1900 a month Total of 4500 per month. 54k per year. Based on an NOI of 71,986 it comes out to .0124 so 1.2% right
Not a good deal. And if I look at the debt coverage numbers they come out like this. NOI 71,986 Debt Service 30,912 Ratio of 2.3 This confuses me since the cash on cash doesnt work out but the ratio is good. Please explain.
IF i use the 50% rule
Income - 94,800
NOI - 47,400
Cap Rate of 11%
= Value of 430,909
Cash out of pocket of 86,182
Cash on Cash
P & I of 1850
Expenses 1900
Total expense of 3750 per month 45k a year
45k / 86k = .52 or 5.2%
Now this looks more like a good deal right?
Debt service ratio
NOI 47,400
Debt Service 22,200 DSCR = 2.13 This is extremely good right? Please let me know if I did these numbers right. I know its all over the place but I did both what they are offering about what the 50% rule would have me at.