First analysis
Hi,
Here is my first attempt at analyzing a property. If anyone would care to give some feedback, it would be appreciated.
Property Description:
2 building 9 unit apartment complex located in a downtown area of a Midwest city with inter-state, water, and rail transportation systems in place.
The building is about 40 years old, but has been maintained very well.
Building is 11750 Square foot
The lot size is 16350 square foot
New roof
Updated interior
hard wood floors, crown molding, and French doors.
Units: 5 3 br, 3 2 br, and 1 1 br
Gross annual rent $55620, 1 3 br is vacant, rent would be $750 per month.
Asking price $400,000.00
Seller agent claims NOI is $43200 per year, with taking in to account the one vacant unit
So, if NOI is correct, the cap rate would be10.8.
Using the 50% rule the cap rate would be 6.95.
Assuming the complex was full, the cap rate, 8.08.
Not sure who pays the utilities, I am still waiting for the seller's agent to send me more info.
Cash flow:
Gross rent $55620.00 with current vacancy.
Expenses 50% rule $27810.00
Per unit $257.50 per month
NOI $27810.00
Seller is willing to finance 80% at 7.5% over 30 years with a balloon payment in 5.
P&I $26849.88
Leaves $960.12
Or $8.89 per unit per month
Now, I am just getting started, so I have exactly no cash to put in to a deal, unfortunately.
Assuming similar terms for a loan for a 20% down payment, but with a 9% interest, that would be a payment of
$643.70
Per unit $71.52
Net cash per unit of $-62.63
At the asking price of $400K, I think this property is over priced. Even if a person found a loan with 6% interest, and had the cash, the P&I would be $23022.72. For a per unit cash flow per month of $44.33.
I think I would like to see the property for sale at around the $300k mark, or a little less.
Any thoughts on my analysis of this property? I hope to attempt a few more property analyses, to practice of sorts for finding my first property to actually put an offer in on.
Thanks,
Michael