Apartment Analysis Help

[Trevor Martin]

Good morning all! Make today a productive day :)

I'm relatively new to REI and only have two single family homes under my belt at this point. I'm going to a showing for a 12-unit apartment building today, and was hoping to get some more experienced insight on whether or not I should pursue this deal:

12-unit Apt Building
Asking Price: $575,000
Yearly Income (rent): $75,000

Expenses:
Insurance: $2,250
Taxes: $7,800
Utilities: $2,000
Management: $6000 (8%)

Is there anything else I need to take into consideration? As I said, I'm a newbie, and this is my first time dabbling in anything but SFRs.

Thanks!

[Glenn Espinosa]

Using the numbers you provided I'm getting a 6.5% cap rate. You'd need to purchase the property at around $375k to hit a 10% cap. You're behind already but if you want to analyze further you may uncover opportunities to increase the value and make the deal work... Just to get you started:

- Avg market rent
- Vacancy rate, typical or atypical
- Repairs needed
- Seller motivation, is he willing to negotiate terms?
- Value add opportunities (increase rents to market, add bedrooms, decrease expenses)

Usually I wouldn't go much further than that on the analysis since the deal doesn't pencil in to my standards... but it may be good practice for you. Analyze 100, see 30, put offers on 10, buy 1 or 2 - or some variation of that ratio.

Best of luck,

Glenn