9 Unit Apartment Building... Is it worth it?

[Brittnie Stewart]

I really need some help with figuring out if the numbers work for this deal I am trying to do.

It's a 9-unit apartment building that has been vacant for quite some time. The current owner doesn't even know when the last time its been occupied. I've seen the building personally for the last (at least) 7 years in the same condition. So, I know it will need a lot of work. Everything is going to need to be redone (plumbing, electric, heat, floors) I haven't been inside yet to see what other types of things it needs.

It's in an up and coming neighborhood in Baltimore City. Rent will range between $900 - $1050 for each unit. The owner is pretty firm that he wants $200,000 for it. There are no other buildings in the area to really use for a comp. And I'm not completely understanding how to use NOI and Cap Rate to figure it all out. Can anyone help in any way?

[Jeff B.]

take the FMR (you're guessing 1050) x 9(unit count) = a monthly 9450 and an annual GSI of $113400. There's a number GRM used to calc the purchase price but we need the NOI to get to a fair purchase price and Cap Rate. As NOI is GSI - Expenses, you're into another guess for expenses: I used 30-45% of gsi, so NOI is about $73,710.

FMV is about $737,100 (using a GRM of 10) so the $200k is great.

Now, can go all cash?  Financing an empty building is nay impossible IMO.