Apartment deal options - which would you choose?

[Nathan Norway]

Hello everyone, I’ve been analyzing deals on apartment buildings and two of them have caught my eye and I’d like your opinions on them!

1. Purchase price 2,800,000

- 18 units (mostly 2 br)

-cap rate 7.7%

-gross rental income 302,400

-NOI 215,312

2. Purchase price 900,000

- 18 units (12 are 1 bed , 6 are 2 bed)

- cap rate 10.4%

- Gross rental income ~140,000

- NOI 83,600

The first one is near a major college campus, so tenants are most likely students, the second property recently reached stabilization. I think both are interesting for their own reasons. I’d also like to mention I’m assessing these as bringing “hustle” into a deal. I’m new into investing but have experience in financial analysis and reducing costs in an engineering role.

I look forward to hear your thoughts and comments on this!

[Bjorn Ahlblad]

@Nathan Norway sounds to me like you are taking these figures from the listing and accepting them as accurate? The expenses are never correct and things like PM, vacancy, water and sewer are often overlooked. Property taxes are rarely accurate etc. You are better off using the 50% rule prior to getting the right numbers.

I would pick the one in the better neighborhood and where I had the opportunity to do some rehab and raise rents accordingly to force some appreciation.