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REAL ESTATE general practice of evaluating multi-units

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Read Millionaire Fastlane
Jul 26, 2007
hey guys. it's been a while since i've been able to continue my education in the area of apt buildings. i just received the following spreadsheet. i'm trying to build practice in evaluating these things as they come in. from a general standpoint, please comment on the following if it were sent to you:

Rental Income 35 Apartments
INCOME Monthly , Annual
700/each estimated value
$24,500.00, $294,000.00


Monthly, Annual
Electricity $1,000.00, $12,000.00
Water/Sewer $1,400.00, $15,000.00
Ground Rent $15.00, $180.00
Insurance $1,800.00, $21,600.00
Trash $250.00, $3,000.00
Telephone $85.00, $1,020.00
Repairs $1,500.00, $18,000.00
Supplies $500.00, $6,000.00
Taxes and Registrations $250.00, $3,000.00
Bristol $75.00, $900.00

TOTAL $6,875.00, $80,700.00

NET Income $17,625.00, $213,300.00

right off the bat i can see there's no maintenance costs. furthermore they are assuming 0 vacancy.

what problems do you guys see?


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Legendary Contributor
Speedway Pass
Aug 24, 2007
If you're just looking for something that returns a decent cash-on-cash return, and if this is all the information you have, I would suggest building your own pro-forma setup sheet, and then figure out a reasonable purchase price given a reasonable cap rate. After that, make an offer at some % less than that purchase price, and there's your potential short-term profit.

Unfortunately, you don't have enough information here to do much more than that. So, here's the stuff I would focus on:

- First, there is no loss rate associated with the income. But, I have to assume that due to vacancy and non-paying tenants, you will not see the full $24,500 in monthly income. Oh, and if you are actually seeing that amount, there's likely room to raise rents.

- Next, are there any one-time capital costs associated with fixing the place up or with deferred maintenance? If so, that needs to be calculated into the equation.

- Is there any other income associated with the property? Vending machines, laundry, parking, etc?

- As for expenses, some things I noticed:

- Insurance is $21,600 per year and taxes are only $3000 per year. Those numbers seem out of whack to should verify

- Repair costs are estimated at $1500/month. This is less than $50 per unit, which is way low.

- You have no property management costs built in. If you expect to use off-site management, figure 8% of income. If you expect to use on-site management, figure some salary and potentially the allocation of a unit for an on-site manager.

- You don't list any advertising costs, but unless the place is on a major road, you probably will need to do some advertising.

- Do you need to figure in legal/financial costs for professional assistance?

Those are the major things I noticed. Is there a price associated with this property?

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