Re: Owner must sell leaving town… 11 unit bldg. need help? - Posted by phil fernandez
Posted by phil fernandez on February 02, 2000 at 09:15:41:
You’ve got to make sure you nail down the numbers. What are the current rents ? How many vacancies and what is the local vacancy factor for similar apartment properties ? Is any of the rent delinquent ? Are the tenants month to month or on leases?
Verify every single expense. Property taxes, water and sewer charges, insurance, utilities and heating costs, maintenance, lawn care, snowplowing.
Plug in a management fee, even if the owner has been managing the property himself. Your time is valuable. I’d plug in 10% of the gross for this expense.
How bout reserves for replacement. You need to account for the eventual replacement of the roof, furnaces, appliances, hotwater heaters. Exterior and interior painting of the units. New flooring. This expense has to come out of the cash flow not out of your pocket. Sellers never include the reserve for replacement in their expenses.
In a nutshell, verify, verify verify. Do not take the owners or realtors word on this. Do your own due diligence. Then and only then can you know what you can pay for the property.