Buying Apartment Building?

**AMetaj** · 04-28-2009 12:41 PM

Lately I've been looking into buying 3 small apartment buildings, consisting of 14 total apartments, that's not in the best shape. They're close to my house and are an eye sore for the community. I needed some advice from you guys who have dealt with these kinds of things before, or if you know some information I might not. I spoke to the owner and the price he gave me was $425k, which is crazy in my opinion. I pulled up the PVA records for the properties, and this is what they look like:

Search: Jefferson County PVA
Search: Jefferson County PVA

I'll take some pictures and upload them, but here's a link and you can street view them:

205 Downes Ln loc: Kentucky - Google Maps

The total value of all the buildings is about $266K, and considering their condition they're not worth the asking price to me. There's 10 1BR apartments, and 4 2BRs. When they're all being occupied the income could be 6k/monthly, and 72k/yearly, before anything is paid. The expense log for this first quarter he sent me equal to about $1000 a month, but there is 2 vacancies right now. I'd have to take a mortgage out for this, so what price would you guys offer?

Thanks in advance for the help!

**AMetaj** · 04-28-2009 07:29 PM

Here are some pictures I took today. As you can tell they're in even worse condition now then they were when the Google Maps image was taken.

http://img244.imageshack.us/img244/5...0428191628.jpg
http://img244.imageshack.us/img244/4...0428191729.jpg

**AMetaj** · 05-02-2009 05:19 PM

Nobody can help?

**chrispalko** · 05-02-2009 06:45 PM

Why is the owner selling?

**Squandered Halfpints** · 05-02-2009 11:13 PM

Originally Posted by AMetaj

Lately I've been looking into buying 3 small apartment buildings, consisting of 14 total apartments, that's not in the best shape. They're close to my house and are an eye sore for the community. I needed some advice from you guys who have dealt with these kinds of things before, or if you know some information I might not. I spoke to the owner and the price he gave me was $425k, which is crazy in my opinion. I pulled up the PVA records for the properties, and this is what they look like:

Search: Jefferson County PVA
Search: Jefferson County PVA

I'll take some pictures and upload them, but here's a link and you can street view them:

205 Downes Ln loc: Kentucky - Google Maps

The total value of all the buildings is about $266K, and considering their condition they're not worth the asking price to me. There's 10 1BR apartments, and 4 2BRs. When they're all being occupied the income could be 6k/monthly, and 72k/yearly, before anything is paid. The expense log for this first quarter he sent me equal to about $1000 a month, but there is 2 vacancies right now. I'd have to take a mortgage out for this, so what price would you guys offer?

Thanks in advance for the help!

What price would I offer? Well... if I had time I'd love to sink my teeth into that problem by whooping out an excel spreadsheet and get all crazy with some calcs. using all kinds of numbers (% on loan including points, commission and closing costs on sale, term. cap rate, projected NOI, ADS/DCR) - all kinds of good stuff. Add all projected cash flows (60k * 1.035^1 + 60k * 1.035^2...) --> and then discount each one of these calcs. by the return your looking for (say 10% = (60k*1.035/(.10) + (60k*1.035^2)/(.10^2)...<1.035 = assumes 3.5% growth rate, based on long term historical inflation rate, you can use any growth rate, even 0% if you don't plan on ever raising rents>, subtract all you debt expenses, figure out a good term. cap rate and use it to find a potential sale price that will get your equity reversion. After you add and subtract a couple of these figures, bam! offer price. --> wow look at that, who says you don't learn anything in school

**rs9996** · 05-03-2009 02:53 AM

Property Cap rates are affected by the vacancy factor as well. If I were you, look the
other way for another deal.
Rest you are the best judge...
Still interested, ok ask the owner for Tennant estoppel forms to determine the
length of the duration of the tenants stay. Check for the insurance of this property!!
You will need a dwelling atleast, PM me if you need more info, before I bore people here.

**AMetaj** · 05-05-2009 06:04 AM

Thanks for the help everyone. The owner's selling because he 'doesn't have time' for the apartments which is apparent by their condition. I went and looked inside the buildings and apartments with the owner, and excuse me, but they're shitty. All the apartments on the bottom floor are leaking in the bathroom from the upstairs apartment, and the owner seems to think that this is normal and doesn't fix it

. In the building that has a hallway, there's transmission parts all over the floor, and it's very hard to get by.

Long story short, they're in bad shape, but the owner won't budge from his $425k asking price.

**kcdmrz** · 05-05-2009 06:27 AM

well it depends on the environments demands. the population and wealth. I think that u need to negotiate with the seller to decrease the prices. i don't know the inside condition but u can make a little construction for the exterior(maybe swimmimg pool) than it will be profitable, and i think this is the best time for to invest in real estate if u have any money

**AMetaj** · 05-05-2009 08:53 AM

It's a mainly middle class area, some homes in the area even lower class. The apartments are in the $400-500 monthly range so they're not very expensive. In my head the property has plenty of potential, if it had a good owner/landlord. A swimming pool wouldn't be possible because there isn't actually much land other then the small parking lot, and a small lawn. I sent him an offer for $250k so we'll see how this turns on.