All Forum Posts by: R Sean

Gross is... $3,775
NOI is...... $1,888 using 50% rule
Net............$1,888
Debt Service ($1,048) -financing all $150k @7.5% for 30yrs
Net.............$840 /month

OR $160/door/month

PURSUE if no red flags come up in repairs, maintenance, etc.

Lucia,

Great question, and one that we all face. My recommendation is to keep the 'face rent' the same and offer incentives, like free rent; HOWEVER, I suggest amortizing the free rent over the rental period to lessen the cash flow impact.

For example, in these cases I always favor a 13 month term with the 13th month free and that one month is spread out over the 13 month lease term.

Here is an example:

Monthly Rent: $800
Inducement: $800 (one month free)
Inducement per month: $61 ($800 / 13 months)
Net rent: $739

Hope that helps.

R Sean

chris,

welcome. I am in houston and coincidentally live in Pearland too.

small world.

Ken,

Unless contracts are unusual in that area, apartment leases are typically only one year long. The "4% vacancy" appears to be a projection, and given that turnover at some complexes can be as high as 25-50% in a year, I'd suggest winnowing down the 4% to 10-15%.

With that level of conservatism you have room in case things don't pan out as projected.

As for capex, I suggest looking at similar aged assets that have recently traded and get the offering memorandum with ACTUAL operating history to use as a basis for your estimates. Loopnet may have same.

Let us know how it goes.

Ken,

I won't question your assumptions, but 5% vacancy and NO capex seems very aggressive.

If, and a big IF, these are correct, your yield to equity is 28% ($27k / $90k)...which is good...and moreover your initial yield (or "going in" cap rate) is 11% ( $88k / $745k)...which is the sweet spot.

Pursue the deal.

Yes, this is a good deal.

Looks good to me @120k.

Using 50% rule you have 1,100/month less DS of $630, leaving $470 net or $117/door. This assumes NO repairs/ cap ex.

Looked at another way, this deal is yielding an 11% unlevered cash yield ($1,100*12 / 120,000k). Sweet spot.

I look at it from an unleveraged standpoint...cash flow / investment....so if you generate $887.5/month using 50% rule or $10.6K year (aggresive cuz assumes 100% leased) over your $135.5 investment yields 7.9%. I don't know anyone who is paying sub 10%, so by my measurements, there are better deals to be had.

Simple question....is co-brokerage on multifamily typically an even split of the commission?

For example, a $100 apartment complex generates $6 commission upon sale, $3 of which goes to the buyers agent?

Thanks in advance!