Appartment Complex - Posted by mk

Posted by mk on July 23, 2003 at 22:33:27:

Yes, There are some discrepancies. I missed out on a 1.5 kind of bedroom house. BR+ loft. Also there was a typo in the 2 BR numbers.

  1. 31 Unit COmplex- 17 * 1BR----13 * 2BR----and 1 * 1.5BR(Loft)
  2. 2 units are half burnt and no longer considered to be rentable. Both are 2 BR appts.
  3. 25 Units rented, 4 vacant, 2 burnt :slight_smile:
  4. Amount $8225 is the rent for the currently rented units.

Still I think there is some small discrepancy that I need to find/figure out

Thanks for looking at the numbers so closely.
Any advice is welcome.


Appartment Complex - Posted by mk

Posted by mk on July 21, 2003 at 21:26:03:


Preliminary Info on an appartment complex I am looking into in the state of TEXAS.

31 unit apt complex
Sales Price: $550,000
Units: 17 (1) bedrooms
11 (2) bedrooms

Current status : 25 of 29 units 4 vacant are 2BR units.
Average Rents : 1BR rents average $325 2BR rents average $400

Average Gross income: $8225 (based on current occupancy)
Other Income: $150 (coin operated washers/dryers)

Unit Ammenities: stove, refrigerator, a/c (window - 1BR or centar air/heat 2BR) dining area, large closets, Free cable & Water
Complex Ammenities: pool, coin laundry, adequate tenant parking, cable


Average Expenditures:
Water = $1400/mo average
Cable = $600/mo average
Gas = $9/mo average (gas laundry dryers only)
Electric = $80/mo average (exterior lighting & washers)
Advertising = $30/mo average
Phone = $50/mo average
Maintenance = $325/mo (current on-site maintenance getsfree 1BR rent for 40 hrs/mo labor)
Annual Taxes = $7900/yr. (average)

TOTAL EXPENSES = $3152/mo average.

Am I looking into something good or…

Expert opinions please.

Re: Appartment Complex - Posted by Robert H. Turner

Posted by Robert H. Turner on August 02, 2003 at 17:07:48:


Your reported expenses are WAY too low. $1,220/unit annual average is exceedingly low for such a small property. It would seem that either (1) the current owner isn?t recording all of the expenses or (2) the property is being significantly degraded by a lack of on-going investment.

Even assuming you can do all of the maintenance, leasing, unit-turnover, and mechanical maintenance yourself (not an easy job), you are still at least $800 to $1,000 per unit per year below what I would assume for this type of property.

Also, the rents seem VERY low. This means it?s either in (1) a small town or (2) a very depressed or affordable location within a larger city (assuming there are no government or rental restrictions). If in a small town, you may be able to run the property at the low-end of my estimate. If your in a depressed or lower-income location within a major city, you are WAY overpaying for the property.

Given the rents quoted and assuming no additional physical or location-specific value (other than the income approach), I would say pricing should be well below $12,000 per unit (vs. your stated $17,000 per unit).


Re: Appartment Complex - Posted by RobH_WA

Posted by RobH_WA on July 22, 2003 at 15:55:46:

I cant reconcile your occupancy/revenue numbers.

  1. 31 unit complex
  2. 17 (1 br) + 11 (2 br) = 28 units (not 31…)
  3. 25 of 29 (??) units 4 vacant are 2 br units (assume means 25 occupied and 4 vacant are 2 brs? but how does that reconcile to 31 or 28 units?)
  4. If 25 occupied and Gross is $8225 then average is $329 (but 1 br avg is $325 and 2 br is $400?)

Could you clarify?


Re: Appartment Complex - Posted by Don Dion

Posted by Don Dion on July 22, 2003 at 15:47:44:

Looking at your numbers I dont think this building will cashflow based on local bank underwritting. I made a few changes to get a max loan amount. Increased the rented 2br units by one with a rent of $450 and used a market rent of $450 for the 2br and $350 for the 1br for a turn over rate. I get a max loan of $352,000 or 64% LTV the problem is one important number has not been inserted yet – Insurance and with the pool its going to be high. Once Insuracne is put into the expenses it will kill the deal. Also in the maintaince figures its labor only and nothing is showing for materials being replaced.

From a Lender’s Perspective - Posted by Les

Posted by Les on July 22, 2003 at 11:38:31:

Lender’s typically look at the Debt Service Coverage ratio (DSC) to determine if the project generates sufficient income to repay the loan. Based on the information provided, and some other basic assumptions, it looks like this property would be at, or slightly above, the preferred ratio of 1.20%. So, from a financing stand point you should be OK.

If you have any questions about how I calculated the DSC, drop me a line with your phone number.

Good Luck,