Rules for small Apts

[Jacob Phillips]

What’re some of the “rules” you guys use when evaluating potential smart apartment deals? For this example, 36 units. I know they’re simply “rules” and not laws, but what are some rules of thumb you guys use when evaluating a small apartment deal?

[Greg Scully]

@Jacob Phillips - Use rules of thumb to see if there any potential, it's just a quick way to see if there might be room for an offer.

Gross potential income
-10% Vacancy
= Net annual income
-50% expenses
=Net operating income
/ Cap rate %
= offer price

GPI  $100,000
-        $10,000
=        $90,000
-          $45,000
=       $45,000
/        8%
=       $562,500

If you're with 20% of the asking price it may be worth looking into.