I need help analyzing this deal. to see if its worth it. my first time buying an apartment complex and not sure what to look for?
Purchase Price: $ 499,900
Amount Financed: - $ 399,920
Down Payment: = $ 99,980
Purchase Costs: + $ 9,998
Rehab Costs: + $ 0
Total Cash Needed: = $ 109,978
Price Per Square Foot: $ 66.7
Price Per Unit: $ 62,488
RETURNS & RATIOS
Cap Rate: 10.7%
Cash on Cash: 17.3%
Return on Investment: 3.4%
Internal Rate of Return: 3.4%
Rent to Value: 1.3%
Gross Rent Multiplier: 6.5
Debt Coverage Ratio: 1.6
Loan Type: Amortizing
Loan Amount: $ 399,920
Loan to Value (LTV): 80%
Loan Term: 20 Years
Interest Rate: 6%
Loan Payment: $ 2,865 Per Month
$ 34,382 Per Year
Rent Collection: Monthly
Appreciation: 3% Per Year
Income Increase: 2% Per Year
Expenses Increase: 2% Per Year
Selling Costs: 6% of Sales Price
Land Value: $ 0
Total (2% of Price): $ 9,998
Total: $ 0
You did not provide enough details to see if this deal is worth pursuing.
Here is what's missing from your analysis:
- unit mix with square footage, current and projected rents, and rents per sqft
- current and projected rent collections and other income
- vacancy factor (5% is not enough)
- current and projected expenses broken down by category (don't forget CapEx reserves)
- 5-10 years projected P&L statement
- exit strategy: sell - when and at what cap rate, refinance
- rehab budget - you cannot seriously consider $0 in this category
Do yourself a huge favor and build your own proforma spreadsheet. That way you will understand what numbers go where, how they depend (or not) on each other, and how to estimate them correctly.
Read "Buying and Selling Apartment Buildings" book by Steve Burgess. This book has plenty of detailed analysis spreadsheets and you can use them to create your own.
Land value missing. In Santa Clara County for example it used to be 1/3 purchase price.
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