Hi - I’m new to apartment community investing. I’ve only been involved in very small development and land purchase deals. Ready to buy an apartment community (I have 20 years in property management handling other people’s money) and not sure if I can make these numbers work. Price for the 40 units is $ 635 k. Can’t believe the price and yes, I’m comfortable with the location of the property. It seems as if it is so low because it is being mismanaged since I’m sure I can shave those maintenance and office and management costs. But, am I looking at the whole picture?
The expenses currently on the property are very excessive. Their summary is as follows:
Yearly:
Total income: 163,986
Total expenses: 116,107
Broken down and rounding by me:
Advertising 4k
Office supplies/admin and office salaries 26K
Utilities 8k
Maintenance and salaries and contract 47K (including turnover costs)
Management fee 8.5k
R&R 7k
Insurance 5.5k
Property Taxes 15k
I see lots of room for improvement in the expenses, but any input by you guys would be GREATLY appreciated. I just want to make sure if I make an offer that I understand what I’m getting myself into since my “new investor” status may get me in trouble in unforseen ways.
“20 years handling other people’s money” is that PM or AM? If PM, what type of property did you manage to not know more about whether this deal works or not? did you buy it?
Yes, I believe it could go up a little. So that I may learn from you, Don, may I ask what you looked at to come up with average of $341? What calculation do you do to see that rents could be …?
Thank you, Chet - I will try one. However, I already know the financials don’t work so the numbers won’t work. I guess what I need to know is if anyone thinks the numbers COULD work with better management. Thank you.