Investor · Phoenix, AZ · Member since 2017 · 583 posts · 919 votes
8y
I doubt this is actual.
First, vacancy was right at 5%? I highly doubt that.
Second, no electric expense? It's possible, but that means there is zero lighting on the exterior of the property. Properties usually have security lights, walkway lights, landscaping lights, etc.
Third, no other income? They didn't charge a single late fee?
This just screams broker proforma to me. Ask them for the T12 P&L by month. I'll bet it doesn't tie to these numbers.
This deal seems to make sense financially. The numbers all make sense. 40% expenses is a tad low, but still within the reasonable range. 10 CAP is generally very good.
My concern would be the area. If you don't feel safe in it then I'd be hesitant. I couldn't tell you anything about the path of progress in your area, so be sure to check on that with someone local who isn't trying to sell it to you.
Side note: be sure these are definitely actuals. It's odd to me that the vacancy is exactly 5%. Looks a little like pro-forma numbers.
Investor · Phoenix, AZ · Member since 2017 · 583 posts · 919 votes
8y
I doubt this is actual.
First, vacancy was right at 5%? I highly doubt that.
Second, no electric expense? It's possible, but that means there is zero lighting on the exterior of the property. Properties usually have security lights, walkway lights, landscaping lights, etc.
Third, no other income? They didn't charge a single late fee?
This just screams broker proforma to me. Ask them for the T12 P&L by month. I'll bet it doesn't tie to these numbers.
Investor · Bergen County , NJ · Member since 2017 · 34 posts · 9 votes
8y
When I looked at it it made sense from a cash flow investment @Paul Smythe.
In broker email specifically states that they are the actual numbers. There is a revitalization program going on in the area but I'm not resting my hat on that. They have been doing that in a town near me for 15 years yet hasn't gotten any better....
Also, note there are no other contract services. Is there any pest control, landscaping, or trash expense? Plus, there are always some small amount for miscellaneous expenses. I'd inquire more.
Investor · Houston, TX · Member since 2015 · 233 posts · 188 votes
8y
Yes, you need more information. How do you know the taxes are staying the same? Usually they go up a bit. I see your insurance is lower for year 1, do you have an actual quote? Overall, the expenses seem too low.
Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes
8y
This looks like a proforma, not actual performance. Buy it on actual performance, so ask the broker for the last 3 years of income/expense along with a current T-6 and rent roll.
Expenses are also low. Maintenance and repairs are low (should be 10-15% depending on condition of building). Reserve account seems low unless it's renovated recently. Also, no electric or gas in the common areas? No trash expenses? No city licensing fees? Looks to me like you are also missing bookkeeping/taxes (not RE taxes), marketing and landscaping.
With that said, I would say you are at $75k-85k for expenses.
Contractor · Minocqua, WI · Member since 2016 · 44 posts · 12 votes
8y
I am in agreement with those that question whether or not the figures are actual, they seem "pro-forma" to me.
A few other comments, pay close attention to the property taxes. Get a copy of the actual tax bill and then speak directly with the local assessor to discuss how your purchase of the asset would affect taxes going forward. No electric expenses is ridiculous, even if there is no common area electric (very doubtful) there has to be some accounting for electrical usage for vacant units. Like the others indicated, request the actual T-12's as well as a current rent roll and delinquency report.
Finally, a 10% management fee is very high. Granted it is a smaller property, but 6% or 7% seems more reasonable.