This thread was written in regards to new, FOR SALE, HIGHRISE Type 1 projects, not 40 year old, wood structure apartments.
“In the mid 90’s many apartment buildings in City Hts sold for under $15,000 per unit. Apartment buildings sold for less than 1/2 the cost of building the fees and permits to reproduce them!!!”
Please show me one comp that proves this. Lets look at the math:
Purchase Price $15,000 per unit
Down Payment: $1,500 per unit
Interest Rate: 10% ($1,350 interest per year)
Taxes @2%: $300 per year per unit
If the property was rentable (not condemned, burned down, flooded, etc.), an astute investor would only need to gross $152.50 per month per unit to get a 10% return on their investment, not including any depreciation. I didn’t factor vacancy or repairs but I know that rents were higher than $152.50 per month throughout the 1990’s.
As far as your current 20 unit apartment, your $800,000 “premium” disappeard because the condo conversion market is flooded. Assuming that the property is in rentable shape, I would imagine that any investor looking at your property would value it based on its current rents. Replacement costs have nothing to do with your unrealized “premium”.
