Is 24 units a decent size apartment complex?

14 Replies

I am going to make an offer on a 24 unit apartment complex. I had heard that 40 units was the smallest to consider. That being said I now have 17 units spread across duplexes, houses, and a quadplex.  I will need to use a manager on this one as it is about 45 minutes away and I have a full time job. 

How can I find someone to help me price the apartment complex. My experience with appraisers has led me to trust my own numbers over theirs. However I have never bought more than 4 units so I need a little help on this. 

Thanks in advance!

Congratulations on the find. Let's hope it all works out for you these days seller's expectations are over the top. Whoever told you anything under 40 units is too small is misinformed! I have a 12 unit and it is a wonderful investment; having all the tenants under one roof makes management a breeze. I sometimes think they have lost my number! ;<))

The price is completely dependent on income and adjust for age or lack of maintenance and deferred CAPEX. Get a rentroll, leases and financials and have an inspection done by a licensed inspector. Some places want an offer before you get into all that detail if so make one subject to inspection of financials and property.

Post any details here and you will get pro help. All the best!

Uncle GC said that start 16 units is OK Start but preferable 32 units. I am going to trust Uncle G that your 24 should be fine. 

If it's managed then size should not matter. Only in the case of an on-site manager that could not be shared for some reason, you might pay too much for management. But I imagine any decent size metro will have a management company who could do it around 10-12% all-in management cost. 

I went from 17 one-to-four unit properties, to a 24 unit in June, to a 40 unit closing next week. They all have their challenges but just find a good manager who can handle it and I don't see any reason that 24 is too small. 

@Toben B.

Toben: 24 units is a great size! It's still too small to form an on-site management team, so your biggest asset (and risk) will be a strong property management team.

The underwriting will be important. You'll want to make sure your growth assumptions, rent roll assumptions, and expense assumptions are independent of the broker's opinion. Costar has good data, but you'll want to supplement with local research (, craigslist, zillow, etc).

24 units is definitely a decent size and you spread your risk and keep a big % of your income when a tenant or two move out.  I am a newbie who has just started using @Michael Blank's Syndicated Deal Analyzer. It works for assessing apartment buildings on your own or syndications. There are also free alternatives or you can make your own spreadsheet. I suggest contacting two or three local property manager's to help assess the marketplace, location and get their opinion on rents. This is a great help when I don't know the market and I recommend it wholeheartedly. You will need an offsite property manager on a small deal (under 80-100 apartments) and if you bring them in early they can help you understand the market and even help you assess the deal. The more eyes the better.

@Toben B. Get a P & l from the seller and put the numbers on BP you will get plenty of expert opinions of what it’s worth. Make your offer contingent on proof the numbers are accurate ( if they acceot your offer ask them to provide T 12, rent rolls, utility bills, proof of deposit, Tax returns etc) As far as it being big enough that depends on your goals, what are you looking to accomplish and how will this building help you do that?

The seller has provided me with a pro-forma. How do I get them to give me the actual P&L? I sent them proof of funds for a 20% deposit if we can come to terms on the price.

Rent roll is 24 units at an average price of $620.  3 buildings - 2 story with 8 units in each story. 

Demand for housing is very high in this suburb. Population growth is very high. 

How do I estimate the value of the apartments without the P&L? I have 5 duplexes now. If these were duplexes I could estimate the value quite easily.  Should a 24 unit apartment have similar or lower expenses to 12 duplexes?


@Toben B. To get the actual P&L you simply ask for it. I would ask for 3-5 years. If they say no that is a giant red flag and I would simply leave at that point. Assuming you get a P&L share it with your accountant. Run the numbers on BP. Definately get a proper inspection. A 24 should definately be more profitable than your duplexes.


Get current rent rolls. figure out gross rents. put in a 40% expense ratio and then your NOI. based on PP, your DSCR should be over 1.25. higher the better. This is the short hand way of how lenders underwrite MF so you should too.

Figure out the average cap rate for the area and compare if you are over paying or found a good deal. then plug in stabilized pro forma rents, figure out NOI, plug in a conservative cap rate and you can figure out your exit price. Even if you don't plan on selling, have an exit strategy on hand - sell, refi or 1031x. that way you can figure out what the upside is in addition to cash flow.

good luck!

Here are the number I was given. They look low, but I am used to duplexes.  Apparently water is included in rent. I am rounding to make it simpler

Gross income $158,000


Insurance        $11,500

Office                $400

Collections       $550

Cable               $2870

Property Tax   $7800

Repairs/maint $12,800

The expenses look a little low, but the owner is managing himself. 

Updated over 2 years ago

These are 2017 actual numbers. The current rent roll is $178,000 if 100% of rent came in.

Updated over 2 years ago

Water and Trash Expense $8400

24 units is a hard one. It's big, yet small. Too small for on-site management, yet big enough where you want on-site management. It's that stuck in the middle property. If it is B+ to A, then I would say to go for it. If it's a C property, then I would say don't. 

3rd party managers want to make money. If they are dealing with a difficult 24 unit that only rents for $800/month/unit, that is a lot of work for the headache. If it is an A class apartment that is going to be a lesser work load and rent for $1200/month/unit, then it becomes more lucrative for them to manage. 

(the rent numbers are just examples)

Property is B but surrounding population is growing nearly 3% a year in this suburb. There is no affordable housing nearby. 

@Toben B. $620 *24 *12 = $178, 560 if you take the $158,00 gross income that vacancy of just over 11%, not terrible, but need to talk with lender to make sure this isn't going to be an issue.

Expenses are definitely low if you're going to have management, but ultimately it doesn't matter, not really.

Ask your manager to put together a proforma and see what your income and expenses are and how much upfront capital you're going to need to hit those. Also, ask to see what they think would happen to income/expenses if you put in more capital or less capital. 

Plug in those numbers and see what your returns are, if they work than buy it, if not offer what makes sense. If there's a big discrepancy on it, talk it through with the broker and explain what you're seeing and why it doesn't make sense. Perhaps theres something you're not accounting for and he knows about and then discuss it with your manager.

Maybe he knows its overpriced and he's testing your feasibility a bit, if you can explain why you're not interested at that price, he may know not to bring you overpriced deals anymore.

Also, make sure you know how taxes are being reassessed for commercial properties, might be different than duplexes. 

Quick maths $158k / 2 = $79,000, I'm going to overshoot and go for a 7% cap rate assuming it's in Tulsa area (I know 45 mins away) where you are from and I get a value of $1,128,571.43. This is roughly $47k a door which is good, we always like to see price per door less than or equal to avg rent x 100.

TLDR: Find a good manager and ask for their help

@Toben B.

I'm in the market right now for about a 16 plex. I also work a full time job, and have purchased three smaller properties in 2018. Lots of good info here from people. Pro Forma's are "fun" and all, but of little use to me. I'm asking for Profit and Loss statements, actual utility bills for 24 months, verifying property taxes on county assessors website, want the exact rent rolls and leases, and will call my insurance agent for the rate I'll be paying. Also, I'd like to see what the actual maintenance that was done. I do estimate the vacancy, capex, property management, and maintenance reserves based upon the actual property I'm looking to buy. Invariably, the pro forma's I see seem to miss at least one expense; such as maintenance, property management, or vacancy. I'm not sure how you come up with an offer price without a lot of these. I would NEVER flat out believe what a broker tells me. I appreciate that all the units are rented, but that doesn't make future vacancy rates 0%, sir. And my pet peeve is when they say what rents "could" be, or that "rents are way below market rate". Ok, well, I'm still making an offer based upon the income I'll be stepping into. If rents "could" be so much higher, how come they aren't?