Opinions Needed: Why Won't this Apartment Sell?
I'm practicing my underwriting on various local apartment complexes and found an interesting case that I wanted feedback on. Perhaps my method of running the numbers is wrong, I'm forgetting something or the local market is missing a massive deal. Either way, I'm sure I'll learn something and hopefully others will too!
The building: asking on MLS is $400k 1980 build, 8 units, all 2 bed 1 bath Class C. 62 days on the market.
I used verified rents from 2008 as well as current listed rents for the building to figure a conservative monthly rent to be at $4750.
$57k gross annual return. take off 30% (8% vacancy, 12% PM, 5% Cap Ex, 5% Maint.)
We're looking at $39.9k return a year.
If someone paid all cash at asking price, it would be 39,900 / 400,000 which comes out to a 9.9% return?
If you got a mortgage and put 30% down, ($120k) you're looking at est. $20,796 in mortgage per year. Take that off the 39.9k and you have a return of $19,104/year. If you divide that by the initial investment of $120k, that comes out to a 15% return?
So, what am I missing here? I know I'm assuming a turnkey property with no value add potential. Why won't this property sell though? any feedback would be greatly appreciated.
Edit: I'm not an agent nor related in any way to the seller. I'm observing the local market and trying to learn.