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?
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.