16.61%:    Investor's Estimated Annual ROI (not including additional tax benefits)
$200,000:  Total Initial Investment Required (may be split between investors)
Property:
  • 12-unit apartment complex.
  • C+ property in a B area.
  • Rents under market due to deferred maintenance.

Area:
  • Population is increasing. 
  • Business is moving in. 
  • Diversified economic base. 
  • Rental vacancy rate in area is low.
Strategy:
  • Reposition and 5-year hold. 
  • Property already has positive cash flow at purchase closing. 
  • Forced appreciation through tenant repositioning
    should increase property value from $470,000 to over $750,000 in 5 years.
Deal Details:
Asking price: $575,000
NOI per seller: $47,800
CAP rate: 8.3
Actual NOI: $42,709
Offer based on 10 CAP: $427,090
Negotiated purchase price: $470,000 (based on significant upside)

Years 1 and 2 show lower cash flow as rents are increased.  
Years 3, 4 and 5 have significantly higher cash flow. 
Total estimated ROI for partners is 83.03%, for an estimated annual ROI of 16.61%.