Breaking down a possible deal

[Craig J Chelette]

Can someone please walk me through this possible deal? The good, bad, and ugly? I am new and am trying to learn to sift through deals to find a good one to get into investing.  Thanks

"Restored turn-of-the-century Avenues 6-plex for sale by owner.

Gross rents = $6270 / mo.

Very low historic vacancy.

Current occupancy = 100%.

At $850,000 this property is an 7.7 CAP (averaged over past 3 yrs--using actual income and expenses... not "projected")... which is higher than any other similar multi-family / investment property I've seen listed here in SLC in quite a while.

All units in excellent condition.

100% of monthly utilities (electric, gas, water, trash, internet) passed through to the tenants.

Strong rents.

Excellent Avenues location.

Highly qualified tenants with good deposits.

Very little deferred maintenance. (Could use a roof in the near future but aside from that, the building and mechanicals are extremely solid.)

Reply to this posting with specific questions.

* I do not need an agent so please do not contact me if you are not a qualified buyer. *

Full stop. Look up and read the above line again. Thank you.

Might be willing to carry paper for the right buyer... at the right price... with enough money down.

The building is fully leased and makes good money every month so I am in no particular hurry to sell. So, not interested in lowball offers, goofy trades, etc.

I have full, detailed financials on this property going back several years. But obviously not going to provide those to any and every tire kicker that asks for them. :) As stated above, this property is a solid 7.7 CAP @ $850k, averaged over the past 3 yrs. If you can find a better CAP than that--in Salt Lake City--particularly in the AVENUES--I'd buy it."

Obivous things that stick out to me is the price, the need for a new roof in the near future.   Also if you are using the 1.5% or 2% rule, the price is almost double.   What else should i be looking at and for?  Thanks again 

[Matt Lefebvre]

$6270/mo = $75,240/yr in gross rents. Since I don't know the actual expenses here, even estimating 45% (which is pretty low considering its a "turn of the century" property) of gross income as expenses, you end up with a NOI of $41,382. $41,382 / $850,000 = 4.87%

That's a cap rate of 4.87%... not the 7.7% cap that's advertised.  If he really has a 7.7% cap rate on this property, that means his expenses run about $9,790 per year (($850,000 * 7.7%) - $75,240).  I'm unfamiliar with the numbers in Utah, but $9790 would barely cover taxes and insurance in my market.