How to evaluate return on Apt building.

8 Replies

Is this you proforma or somebody else's? Either way, P&L portion is missing. Without it, there is nothing to analyze.
21% ARR is great if you can get it. However, see above.
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Yes, IRR. Although ARR (average or annual rate of return) can also be used.

A few thoughts:

  • They want to double the rents. What are the current and market rents?
  • What is the unit mix?
  • Where is this property located?
  • Economic vacancy of 3% on top of the double rent is very low
  • Payroll of $14-15K is also low. Not even a part-timer would work for that

If I were you I would post the entire investor presentation

I'm sure the company wouldn't appreciate me loading the presentation. All good questions you have and something I'm more versed in. The actual projected returns is my weak part. 

I've had a less than 1% vacancy is this market on another building so I think 3% is safe. And I assume they factor payroll using their inhouse property management co. but I agree I'd probably 2-3x that. 

Send the following information and I will put the numbers in my software and see how they come out

number units

last years total for expenses including the property tax you will pay, add management costs if you will have a property manager and include every expense except your mortgage payment.

gross income
purchase price
down payment
your closing costs
total loan amount
interest rate
how much do you think you can increase rents within a few months after escrow closes
how much can you increase rents every year
do you have major capital expense expectations.

Originally posted by @Dan Taylor :

I'm sure the company wouldn't appreciate me loading the presentation. All good questions you have and something I'm more versed in. The actual projected returns is my weak part. 

I've had a less than 1% vacancy is this market on another building so I think 3% is safe. And I assume they factor payroll using their inhouse property management co. but I agree I'd probably 2-3x that. 

If this is 506c offering, they will be glad you've published it. What if they gain more investors that way?

Hi Jack,

I'm interested to hear more about you software and how it analyses the data below

number units-29

last years total for expenses including the property tax you will pay, add management costs if you will have a property manager and include every expense except your mortgage payment. $190,783

gross income $384,298


purchase price -$5,320,000


down payment

Equity Target

$2,024,280

Company Holdings (10%)

Investors (90%)

$202,428

$1,821,852

Acquisition/Rehab Debt

$5,066,250

(75% LTC, 3.75% Interest Rate)


your closing costs

Escrow and Closing Costs

$30,000

Escrow, legal, due diligence reports

Loan Cost

$44,330

Lender loan fee (.875%)

Reserves

$75,000

Cash reserves

Acquisition Fee

$186,200

Loan guarantee, organizational efforts


total loan amount $5,066,250 +

Investor Equity

$2,024,280


interest rate 3.75%


how much do you think you can increase rents within a few months after escrow closes
how much can you increase rents every year- They are estimating 40% year one and 3% per year thereafter.


do you have major capital expense expectations. Renovation Costs $1,435,000