4 unit Apartment Bldg. question...

[Richard Sindell]

Hi Everyone,

I'm new to investing and need some guidance.  Can anyone please help me?  The president of my condo association has a 4 unit bldg. in the Los Angeles area that she selling.  The total income is $5200 mo. and the Mortgage is about $2500 per month.  I don't yet know what any of the other expenses are but I can find out.  She told me she's asking $745k but is open to offers.  That puts the Cap Rate around 8% based on an about $ 62,400 of annual income.  

How do I figure out if this is a good deal?  I know I need more information..

If anyone can help me out, I'd really appreciate it.

Thanks!

Richard

[Account Closed]

Originally posted by @Richard Sindell:

Hi Everyone,

I'm new to investing and need some guidance.  Can anyone please help me?  The president of my condo association has a 4 unit bldg. in the Los Angeles area that she selling.  The total income is $5200 mo. and the Mortgage is about $2500 per month.  I don't yet know what any of the other expenses are but I can find out.  She told me she's asking $745k but is open to offers.  That puts the Cap Rate around 8% based on an about $ 62,400 of annual income.  

How do I figure out if this is a good deal?  I know I need more information..

If anyone can help me out, I'd really appreciate it.

Thanks!

Richard

Anybody trying to sell you a 4plex with a value base on a cap rate is trying to take advantage of you. 

Wait, the $62,400 is gross rents?

1.  There are no reliable sources for cap rate comps for 4plexes.  Forget cap rates.

2. Learn how to calculate NOI. You need operating expenses to do this.

3. If gross rents are $62,400 and you purchase at $745,000 then the GRM is 11.9.

Have comparable properties sold for 11.9 times their gross rents?

If the comps have only sold for 9 times the gross rents then anything over $561.600 is overpaying.