Help with Rental units analysis going to auction
Hi Folks,
There is this 96 units property going to auction. As I am preparing a financial summary for a 25/75 split equity. 25%---me and the equity partner 75%.
Here is the number
23 studios x 800 = 18,400 ....... low end rent (800-875)
40 One Bedroom x 1125 = 45,000..... Low end rent (1125-1175)
33 Two Bedroom x $1225.00 = 40,425...... Low end rent (1225-1300)
Monthly Income: 103,825
Yearly: 1,245,900
Other income (laundry): 5,000 (very conservative)
AGI: 1,250,900
Figuring out Acquisition Price
Expense analysis @ (50% rules) = 625,450
Net Revenue: 1,250,900 - 625,450 = 625,450 (subtract the 50% operating expenses from the gross revenue to solve for the net operating income (NOI).
Cap Rate = (NOI / Purchase Price)
Purchase Price = (Net Operating Income) / (Cap Rate = 10%)
625,450 /10% = 6,254, 500
@ Cap Rate = 7%
8,935,000
Offer price:
Factoring acquisition @ (10% cap rate incl ( Rehab + 3% acquisition cost)) = 450,000 + 187,635 = 637,635
6,254,500 - 637,635 = 5,616,865
@ 7%
8,935,000 - 718,050 = 8,216,950
I am thinking at the auction 6.5- 6.8 mil probably the highest I should bid. Any feedbacks.
Exist strategy:
Refinance property in 5 years with Government back loan to payoff equity investor.
Sale home for a profit in 5 years based on a Net Operating Income with Cap Rate of 7-10%. should have enough money to pay investor.
Does anyone have a good investment pro forma? please