Help with 1st Apartment eval

I looked at my first apartment deal today. I was hoping some of you that have been doing this a while can look at the numbers and see if I am looking at this correctly.

6 unit apartment building with 100% occupancy.
Asking price $550,000
Income = $39,004 yr (this number is with a 7% vacancy)
Expenses = $18,163 yr (from pro forma with no repair dollars reported)
NOI = $20,841

After walking the property I could see repairs that needed to be done and some items that are potential repairs later. Plus the kitchens and bath’s need updates. $25,000 - $30,000 estimated to handle the repairs and updates.

With an updated kitchen and bath and the repairs done, I think the potential yearly income could be $40,678 based on other rentals in the area.

I am factoring a 7% vacancy per year. Is this a good number to use?

What’s a good formula to figure expenses for repairs?

What would be a fair price to pay for the property?

Thanks for any help you can provide.


Throughout the United States, operating expenses run 45% to 50% of gross rents. Here is how I would evaluate this deal:

Gross Income: $3,250 per month
Operating Expenses: $1,625 per month
NOI: $1,625 per month

Mortgage: ($575K with repairs, 20 yr, 8%) $4,809

Monthly LOSS: $3,184 OUCH!

I wouldn’t pay more than about $125,000. That would give you $100/month/unit cash flow.

This is a TERRIBLE deal. I’d keep looking!


Thanks for the information.

What about property management fees? How much do they cost? I have hear 7% of the collected rent.


Management expense is included in the 50% operating expenses. It typically runs about 10% of the gross rents. You need to consider all the additional expenses associated with management including placing tenants, arranging maintenance, showing units, etc.

Good Luck,


Thanks Mike.

I have several more properties I am looking at this week and just want to make sure I can pick out the good deals from the negative ones.

Thanks for your help.