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28 unit deal analysis

ryanpal

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Hello all,

This is a question for SteveO but I don't want to bog him down with questions ;]

Like many on this board I'm reading Voluccii's book about how to buy apt buildings. Although I'm not finished, I feel it's a good excercise to go through the motions to learn by doing. Another investor sent me this excel sheet. I'd like some feedback on any problems that can be seen based on this data...or any other input. I'm very new to this line of investing so I have alot of learning to do. I hope the cut and paste displays this correctly if not perhaps I can upload somewhere....here it goes, any feedback welcome.


cut and paste was horrific.

here's the excel file: http://www.freelispendens.com/28units.xls
 
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JesseO

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Fortunately I've got a deal with very similar numbers so it's kind of easy to compare to yours. First off, I would factor in 10% vacancy and hope for better. You should always try to play conservative with proformas. Also, the water/sewer costs looked a bit low to me; do you know what the actual -rate- is that the city charges? What are the rents for each unit type, and what is the mix of 1, 2, or 3 bedrooms?
 

yveskleinsky

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I am also new at evaluating numbers on a larger scale- so weigh my input accordingly!

Here a couple of points that look suspicious to me:

1. Why are you adding cable to gross income- or to income at all?
2. Utilities seems REALLY low for a 28 unit building.
3. Pest control also seems really low as an annual number.
4. What are you estimated your debt service to be?

...There is a spreadsheet floating around on this forum that is awesome and a lot more indepth. I can't remember who originally posted it, but if you PM me, I will email it to you- unless the original poster minds!

Good luck to you and keep us posted. :smxG: This is a learning experience for several of us!
 

bflbob

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Why no increases in taxes, s&w, cable, etc?

Also, I agree on vacancy, although I use 8%, not 10%.

Finally, make sure what your taxes will be AFTER you buy.

If the current owner paid $750,000 for the place, and you're paying $1.5M, taxes may double.
 
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lee_mre

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I am also new at evaluating numbers on a larger scale- so weigh my input accordingly!

2. Utilities seems REALLY low for a 28 unit building.

What kind of utility rate would you expect to see for this...what is your rule of thumb?
 

Sid23

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- When evaluating the deal, the first thing you need to ask yourself is whether it fits into your plan. Are you looking for a long-term investment? A short-term value play? Do you need cash flow? Or are you looking for capital gains? If you don't know what you're looking for (and why), you can't know if this particular property will meet you goals.

THIS IS SO IMPORTANT! People, especially newbies (myself included), start looking at deals and often forget to ask themselves this very question!

FOCUS, FOCUS, FOCUS.

Rep speed ++ to JScott.
 

yveskleinsky

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I am confused over the spreadsheet. Are we looking at monthly or annual expenses? If the utilities are annual, I can't believe they would be that low. ...Even if they are monthly, I can't believe they'd be that low!
 
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JesseO

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Keeping in mind that every area is different, my utilities break down as follows (rough numbers):

Basic extended cable for all tenants + internet in office: 400.00
Telephone-------------------------------------------: 40.00
Water/sewer/gas/trash-------------------------------: 1,000.00
Electric (common areas, office, pool)------------------: 1,000.00

These are rough monthly actual averages for 28 units or so. Don't forget landscaping (another 300 per month) and misc expenses. Vacancies in this area are at around 8%, but I would assume 10%. I think you need a better spreadsheet to work off of, and some better numbers to use. What do you think?
 

ryanpal

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thank you everyone for your replies.

this sheet was sent from another investor which i'm networking with. the funny thing is, my first thought was "is that a correct assumption for the vacancy rate?". i thought 10% was a rule of thumb as well but it seems you guys use around 8% or so. also, i'm not sure why the cable is listed as income as well. i found out this sheet is from a loan officer who probably sent it out to a few hundred people. my guess is he wanted the numbers to look nice.

i do appreciate your replies. this was a good first step into analyzing a possible deal. i've received a better spread sheet which i hope to get some data in for another deal analysis.

there were some great points made in here to help with understanding of apt complexes.

:)
 

ryanpal

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when you say historical data do you mean by the building itself? what if this isn't provided? then would you go to surrounding buildings in that area? if so, where would this data be available...if not from the reports provided by the seller?
 
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Wolfgang5150

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Ryan:
My first question is - what are the financials like from 2006, 2005 etc. That is a better place to start.................
Kevin S.
Orchard Park, NY
 

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