Is this deal worthwhile?

1 Reply

7 unit apartment building in a very desirable area right next to university. The property is 100 years old. New roof. Windows have been replaced. The building is in working condition but lots of small repairs needed, all units are tenant occupied. Heating is for whole property. Right now owner pay for heating cost but if I buy it I will divide cost and have tenants pay their share.Kitchen and bathroom are functioning but old. Some toilets are loose. Outside brick wall need to be re-pointed which would cost around $50k. Electric are fused based and need to be upgraded at some time, which will cost $17k.

Total year rent: $77,040

Property Management 8% $6,163

Vacancy 5% $3,852

Taxes & Rental $12,676

Insurance $4,256

Repairs Residential $3,500 (actual, according to seller)

LL Electric and Gas(Common) $7,308 (mainly heating, which I hope to have tenants pay)

LL water $1,878

CAPEX set aside $4,800

Other expense $1,500 (actual)

NET OPERATING INCOME $31,107

Price $640,000

Capped rate 4.91%

FINANCING

Cash From Buyer 25.00% $160,000

First Mortgage $480,000

Closing Cost estimate  $20,000 

Michael, 

Debt service on 480k, 5% interest 20yr commercial paper (fully amortized) is about 3160/mo ×12 mo is 38k. NOI is 31,107 or negative 7k/yr.

So, either knock the price down to something reasonable or walk. 

Just my opinion,  you should run your own numbers.

Good luck, 

Jim

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