Posted by Lin (NC) on April 28, 2011 at 09:54:30:
Dan,
You don’t say what the expenses are, and that’s really important, especially because you have a pool and that alone can kill you on expenses. There are new federal regulations for pools that can add considerable cost if the pool isn’t currently in compliance, and when you have to few units to carry the cost, it could really be a deal breaker. Pools are a BIG negative for small complexes, in my book. In fact, I’d budget to close it if I were looking at a deal like yours with a pool.
What are the expenses the owner is currently showing? What are the expenses that you would have running it your way? Once you have those numbers and post them we can actually help you. Knowing the net operating income is critical to evaluating a multifamily deal. (i.e. what does it put in the bank before debt service?)
There are other factors that are important besides the numbers. What is the neighborhood like? Is it on the decline? How long does the average tenant stay? High turnover will kill your cash flow and will also run you ragged if you self-manage. I know some apartment owners who are stuck with upside down properties in bad neighborhoods because the area degraded while they weren’t looking, or they failed to pay attention to the signs. Presumably this property has already passed this test, but I thought I’d mention it anyway for the benefit of others.
I’m also assuming you mean that each unit rents for $800.
Lin