Would You Take This Deal

I came across this a few days ago. It's a 90 unit apartment complex. The owner is in pre foreclosure due to a high vacancy rate(50% plus 5% concessions). If he doesn't get rid of this than he will be foreclosed on and the current lender is not accepting any short sales at all.

Here are some numbers:

Asking Price-$1,323,000
GOI-$653,760
Annual Expenses-$313,953

What would you do with this deal? Toss it in the trash or come up with a plan to increase the occupancy? By the way the owner is an out of state owner.

Edited: 06/26/2010 at 09:39AM

Tim Meyer

Commercial Lender · Cincinnati, Ohio

4 posts
1 award
50 influence

Sep 09 '09, 11:00 AM

Are those actual in place numbers, or proforma numbers?

Edited: 06/26/2010 at 09:39AM

James Hiddle

Real Estate Investor · Altus, Oklahoma

2,567 posts
7 awards
56 influence

Sep 09 '09, 01:10 PM

Actual numbers no proforma.

Edited: 06/26/2010 at 09:39AM

Peter Giardini

Real Estate Investor · Baltimore, Maryland

Donor

565 posts
11 awards
57 influence

Sep 09 '09, 01:43 PM

From the actual numbers the gross income could be as high as $1M annually. If that correct?

I do see a deal here... would need all of the numbers... but here are some thoughts.

From your perspective why is the property so under managed? Is it lack of management attention, the economy, the overall condition of the property? In short, even if you purchased it at the above price, could you improve the performance to make this a worthwhile deal.

Bottom line... is this property in a location where the economy will support you approach?

If so... and assuming you have some experience in turning a building around, you could see if the owner would option the building to you for a small, non-refundable fee, giving you enough time to "upside" manage it and then purchase it from him outright.

Of course you would have to ensure that you got all of the benefit of the upside and he only got the original asking price.

Let's have some more info... and city would be helpful.

Good luck!

Edited: 06/26/2010 at 09:39AM

Uwe S.

Real Estate Investor · Chemnitz, Saxonia

1,241 posts
12 awards
69 influence

Sep 09 '09, 01:53 PM

In what state is the Property (example north oklahoma)? 50% is certainly unstable, depending on the town and the shape of the buildings and units. But if these numbers actual and you can make over $300k NOI with the actual occupancy, then you make with 90% over $500k per year.
Buy, buy, buy is the motto.

-Uwe

Edited: 06/26/2010 at 09:39AM

Brad Costanzo

Real Estate Investor · Dallas, Texas

4 posts
1 award
50 influence

Sep 11 '09, 06:24 AM

I agree wholeheartedly with Peter. There's definitely not enough information there to make a decision and I will echo all his sentiments.

And you can make almost any deal work with the right negotiation strategies.

But the thing I don't like is that the lender isn't accepting any short sales. Is there a reason why not. Do they fully understand what's at stake? What's the note...?

Also, 50% vacancy is not necessarily a bad thing. It's better than 90% occupancy but with 40% crappy tenants that you have to evict. I'd rather start out clean and move up.

But what experience do you have in turning a property around?

All big things to consider....but good luck!

Edited: 06/26/2010 at 09:40AM

James Hiddle

Real Estate Investor · Altus, Oklahoma

2,567 posts
7 awards
56 influence

Sep 11 '09, 07:24 AM

Actually guys I've decided not to pursue this as it seems to risky for me.

Edited: 06/26/2010 at 09:41AM

Rich Weese

Real Estate Investor · sioux falls, South Dakota

Donor

4,619 posts
15 awards
79 influence

Sep 11 '09, 07:37 AM

James- I might be interested in pursuing this. What turned you off? Is there more bad news? I'd pay you a finders fee if I buy it. PM me with more details or list info here. Where is it? Age? Who pays utilities? Rich.

Edited: 06/26/2010 at 09:41AM

Bob Conroy

Real Estate Investor · Franklin, Massachusetts

5 posts
1 award
50 influence

Sep 13 '09, 08:54 PM

There seems to be potential here. I love turnaround deals - especailly if the property is undermanaged. PM me if you are interested. My concerns would be curing the current back payments due on the note, what part of the country the property is in and if there are significant deferred maintenance issues. Let talk - PM me. Thanks

Edited: 06/26/2010 at 09:42AM

James Hiddle

Real Estate Investor · Altus, Oklahoma

2,567 posts
7 awards
56 influence

Sep 19 '09, 11:54 AM

Originally posted by Bob Conroy

There seems to be potential here. I love turnaround deals - especailly if the property is undermanaged. PM me if you are interested. My concerns would be curing the current back payments due on the note, what part of the country the property is in and if there are significant deferred maintenance issues. Let talk - PM me. Thanks

Bob are you still interested in this deal? I sent you a colleague request a few days ago but haven't heard from you since.

Edited: 06/26/2010 at 09:46AM

Derek W

Real Estate Investor · Canyon Lake, California

Donor

164 posts
4 awards
50 influence

Sep 19 '09, 02:27 PM

If anyone takes the deal, could you update us with progress reports. I would love to see if anyone could make a deal out of it and how. That would be better than an episode of Shark Tank.

Edited: 06/26/2010 at 09:46AM

James Hiddle

Real Estate Investor · Altus, Oklahoma

2,567 posts
7 awards
56 influence

Sep 19 '09, 02:37 PM

If anyone wants a challenge a turnaround deal let me know either by PM'n me,emailing me(email in sig)or send me a colleague request.

Edited: 06/26/2010 at 09:46AM