Author Topic: What would you pay for this muiltifamily?  (Read 771 times)

Steeze

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What would you pay for this muiltifamily?
« on: August 31, 2018, 08:58:40 PM »
Curious how people would price this:

Area: North East
Population of town: <5,000
Population Growth: <1%
Median household income: $38,000
Average Rent: $780 ($450-$900 for 1 bdr)
Closest city over 50,000 is 35 miles
Closest city over 100,000 is 100+ miles
Most employment is in construction and healthcare
unemployment is 4.5%
Crime is low
Average house value : $220000
Multi-families & apartments are uncommon in this area


Built in 1986
(12) 1-BR / 1 BA Units
Occupancy 100%
SF: 6600 (550/unit)
Blg Value: 316,500 (Tax Assessor)
Land Value: 132,000 (Tax Assessor)
Land: 3.7 acres (0.25 AC developed)
Location: Center of Town (Main Street)

Current Rent: $588/unit average
Yearly Gross: 84780
Expenses:

Real Estate Tax 6152
Water and Sewer 2400
Insurance 5600
Electricity 800
Waste Removal 2328
Snow Removal 900
Maintenance 4000
Does not include Cap Ex
Does not include Management

Total Expenses: 22180
Net: 62600

Recent Cap Ex. include:
Roof
Appliances
Exterior Paint
Parking Lot Sealing
Condition is good, well maintained
Units have lower end finishes

bugbaby

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Re: What would you pay for this muiltifamily?
« Reply #1 on: September 01, 2018, 10:43:55 AM »
Well the 1% net return guideline i.e 12% annually would suggest: 60000/0.12 = 500k.

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waltworks

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Re: What would you pay for this muiltifamily?
« Reply #2 on: September 01, 2018, 02:49:01 PM »
Capex and management will both be more expensive than for a SFH, so I'd pay something like $400k and consider it a halfway decent deal.

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Papa bear

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Re: What would you pay for this muiltifamily?
« Reply #3 on: September 01, 2018, 02:57:38 PM »
I would start at 360k. 30k per unit at 12 1 BR. That's a lot of units to manage for the rents.


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tralfamadorian

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Re: What would you pay for this muiltifamily?
« Reply #4 on: September 01, 2018, 04:07:40 PM »
With the demographics and the unit size, turnover is probably high and management is not the easiest. I would be happy with assessed value ($450k) or less.

Steeze

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Re: What would you pay for this muiltifamily?
« Reply #5 on: September 01, 2018, 07:01:54 PM »
Thanks for the replies!

I gave it $500k estimated value

57.5% estimated total expenses:
 ($850/unit/year Cap Ex.)
 ($3200/unit/year Reg Ex.)
to include:
 8.3% Vacancies
 10% management fees
 5% Maintenance & Repair

Cashflow @ $850/mo
Cap Rate at 7.2%
Cash on Cash return at 8.1%
Perhaps with self management & maintenance it could be worthwhile.

Looks like most of the large Cap Ex. items were completed in the last 5 years
With no scheduled maintenance in the first 5 years of ownership
Estimated maintenance schedule is:
Year 5: 16k
Year 8: 48k
Year 12: 32k
Year 15: 52k
Reserves never go negative as scheduled

FWIW asking price is $875k
Wanted to make sure I wasn't crazy @ 500k
« Last Edit: September 01, 2018, 07:04:49 PM by Steeze »

Michael in ABQ

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Re: What would you pay for this muiltifamily?
« Reply #6 on: September 01, 2018, 08:20:18 PM »
So with realistic expenses (including management and reserves) they're advertising it at a sub 5% cap rate. For a property in a very small market with minimal appreciation or rent growth likely. No thanks.