BiggerPockets

Down payment range James?
Would you be willing to wrap an existing note?

James, may I inquire about your strategy? The reason I ask is that finding an A class property stabilized at 85%-90% occupancy will usually not be for sale, not be a motivated seller and will cost you a pretty penny. You will also be hard pressed to find owner financing for it. Similar is true with a B class, however, more exist and you could find more motivated sellers in that category. The problem is, you need a motivated seller and a stabilized occupancy does not create that. I am not seeing the upside to your investment startegy and am wondering what your intentions are.

James, not sure you really answered my question. In a nut shell, how do you expect to find a great deal on a stabilzied property producing great cash flow? Why would the owner ever sell, unless it was for top dollar, in which case, why would you ever pay top dollar?

Originally posted by Mr_Investor

I don't know if I would come across a deal like that Will which is why I'm always looking.

I'll ask you this Will what strategy should I use if you think I can't find a good stabilized deal?

Well I certainly will not tell you there is only one way or the highway, the way I do it, but I will tell you I believe in ceratain markets, that going after the distressed sales (motivated sellers, either private or REO) with lower occupancies and some deferred maintenance will land you the best price points, and the most upsides. I always look for a minimum of 2 upsides in an apartment building and preferably at least 3.

Upsides can be improvement to occupancy levels, increases in incomes, decreases in expenses, dived and conquer, forced appreciation plays in capital expenditures, etc, etc.

Buying a building that is already performing to just about it's highest levels will result in no upside, a very high ask price, and limited financing options.

Again, these are just my opinions on the subject, and the areas you may be interested in may have some other strategies that are viable. :lol:

On the hunt Rich, nothing locked and loaded yet. I will keep you informed as usual. I am also looking for self storage units as well. I was last year, but stopped as I ran into too many deals where the seller wanted too much or some other problem occured, making them not good deals.

I do know that Rich! I will look at what you have. Shoot me an email or call tomorrow.

Can you shoot me an email with more details and elaborate on why you passed it up?

Chris-
1. Over 500
2. Short sale already priced.
3. Comparable to national Rate, 30%
Listing agent is a BP poster, and I have no financial involvement.

Will- I made offers on both facilities. Same price. Short sale lender was stupid and unreasonable. It was actually listed for higher price and they didn't come down to where I wanted. I pursued the other facility and locked it up. Lender came back LATER and reduced their price to a reasonable price. I was already under contract on one as well as the 154 units. I didn't have the time to pursue all 4 properties at the same time.
Lender came back AGAIN and sent their asset disposal guy to meet with me. While considering their new offer, another buyer was accepted. They just asked for an extension and I saw their letter. I think they're going to drop out and I know the lender is sick of it. I only want to try one self storage facility to start. Rich

James- you just got your credit for the thread. I voted you up!! Rich

*I am curious about the "upsides" way of looking at things, and it brings me to a deal I've had on my desk for while and was wondering if nationwide and Mr. Weese could give me their feedback? (or anyone else for that matter!)

It's a 7 unit apartment building on a busy corner - MLS 917738 listed for 179k, I offered 151 and he came back at 165k firm, i let it die. -- it does have some deferred maintenance and seller has been trying to sell for over a year. He lives there and has good tenants - not low income, but not professional, either -- has coin ops. He has MSHA special financing which caps his rents. So right now the rents are exactly $100 below market rent. tenants pay electric, landlord pays heat (used $4,500 gallons last year) -- there are 2 efficiencies and a 1 bedroom and four 2 br, so changing over to LP monitors over time at 1200-1500 per unit will change the heating cost. Also, the building is in an extremely commercial zoned area, RIGHT in the way of progress -- he actually had it tied up a year ago at 269,000 but the market went to hell and the developer backed out.

Gross rents now 40,000 per year -- adding 50 per month (vs. the possible full 100 per month to bring them to market rent) would change it to 44k per year -- the expense, all real except mgmt. and maintenance which I used 8% and 10% respectively, come to 68% of gross income -- the mgmt. fee will give me 3,238 per year while the cash flow is a measely 1,230 per year (15 per unit per month) -- i base this on 163k purchase price plus 20k in improvements (definitely needs roof).

My question is: Could this be a great turnaround story despite the CURRENT measely cash flow? What questions might I need to ask to determine appreciation potential and "buyout" potential above and beyond a multiple of rents? Does it sound like it's worth at least tying up and paying 400-700 for an inspection?

And beyond that, in general, what sort of things can an investor look for - what questions can he ask -- if he's looking for rental realestate, buy and hold, and seeking to go deeper than the "rents = 2% of purchase price" model?