What is a commonly used rule of thumb for residential apartment buildings of 8 units and larger?

Are interested in building portfolio of 100 units or more in Boston area or in Duke County NC.
In Buying Property - Asked by Jim R. - Feb 3, 2009
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Answer(s)

Paul S.
Broker/Agent
Glendora, CA

You will want to look at many things. To start find out what the "going" cap rate is in the area. Analyze the IRR (internal rate of return) of a property 5-10 years into the future with a conservative future sale value (I generally use the same cap out as the purchase cap). Keep in mind whatever you use will be wrong because it is the future and many things will cause unanticipated change. What the IRR analyzation will do is compare one property to another. Be sure and use the same parameters so you are comparing apples for apples. IRR allows all kinds of variables (such as resnt increases) over the entire period of investment while cap rate only looks at a one year window without any debt. IRR on the other hand will take into account variable cash flows and debt.

Feb 5, 2009
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Karen H.
Developer
Beverly Hills, CA

Go to www.cieinst.com and take their free online course. It was immensely helpful to me. I took their 2 day intensive training and learned thoroughly how to evaluate commercial property including apartments and self storage. Their courses are great! I have since purchased 2 properties using their creative financing/no money down techniques and am now making over $12K per month in positive cash flow after all is said and done! I am thrilled!

Mar 18, 2009
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Tai L.
Broker/Agent
San Diego, CA

I say having good management in place. Multi-families are immovable so the manager has to be able to retain as well as promote to get new tenants...replenish the community to reduce vacancies and increase gross income. In addition, having and maintaining amenities fit for enjoyment is a plus.

May 22, 2009
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