79/door is on the high side in KWC .. but maybe OK for all 2BRs especially if in decent location, large, with balconies and upgraded !
Run the numbers using $3600 to $3800/unit/year in expenses to see what a lender would lend you .. maybe only 65% LTV .. using a 7.5% CAP rate or so .. thus you need about $500,000 cash to buy a 20-plex. Do you have that ?
In addition:
1) Ensure that rents, vacancies and expenses are ACTUAL (based on 2 or better 3 years of documentation)
2) Ensure that you know what major items, if any, have to be fixed (roof, boiler, hallway carpets, ..)
3) Knowing these two items know if the price is appropriate.
4)
Know who will be managing the property impeccably and take that person
on a walkthrough with you before you waive conditions !
5) Know what cash you have and what kind of mortgage you can get !
Of course price/door, cash-flow and CAP rate are related !
But: Complex problems have simple, easy-to-understand wrong answers ..
Buying a building is not that simple (i.e. price/door or CAP rate) as many factors have to be considered such as:
a) CAP rate
b) price/door
c) what is behind teh door i.e. condition of suite
d) what is in front of door, i.e. condition of common areas
e) rents today
f) immediate rental upside
g) long term rental upside
h) balconies ?
i) suite size or price per sq ft
j) views ?
k) macro-location, i.e. future of city/town
l) micro-location i.e. suburb
m) condition of major elements like roof, boiler, windows, balconies
n) interest rate on mortgages
o) cash per door i.e. cash-to-mortgage
p) availability of 1st and 2nd mortgage money
q) condo conversion abilities / potential
r) who pays utilities
s) potential future tax increases or decreases
t) ability to lower operating expenses
u) curb appeal
v) "feel" of suite / attractiveness
w) competition from new construction
x) competition from existing buildings
y) in-migration
z) new jobs coming (or leaving)
.. maybe I forgot 3 or 6 more ..
one of these elements overlooked .. and there goes $100,000 or $200,000 in potential profits for an average 20 suiter !!
.. and re your rent increase questions: This is Ontario where by law for 2011 less than 1% is allowed on existing tenants .. more if newly vacant. I do not know the local market but $750 (especially with heat included) for a 2BR sounds low to me for a decently upgraded, well located asset. It may be OK for an ugly one.
