#1: This is not an Mobile Home park? If yes, wrong categorie.
#2: Whats the asking price?
#3: Vacant and in need of rehabs (20k per unit), this is the lowest price range you can figure.
If this propertie located in Ohio or so I would say to seller: "give me $100k and I take it." but youre not in OH :).
If I calculate with $900 rent per unit, thats $172,800 per year - 55% expenses (include 10% vacancy) = $77,760 NOI.
With a 10% CAP its a max price of $777,600 if its fully operational. Its not so I must deduct the rehab costs of $330,000 + 20% ($155,520) for unforseen events (thats my argument to an motivated or even unmotivated seller) = $292,080 price offer if I want 10% CAP (but normal I would go with 12%+).
A totally vacant property is usually MUCH HARDER to turn around than a property that is semi-performing.
I consider vacant property to be almost like commercial development in that you are overhauling a site and property loaded with risk and long time periods before cash flowing.In the end you can do well but also lose your shirt.
With the 16 unit I would take it a step further in your analysis.If 900 to 1100 is the going rent make sure it is accurate.For instance do your competitors have laundry in the room,pools on site,basketball courts,next to work commute,restaurants,etc.
Once you do a deeper analysis you might find your property does not have these things and the rent will be much lower upon rehab.What about the area?? Is it declining,stable,or improving??
If you find the rents are really 900 on the low end base your rents on 750 to 800 a unit.The reason for this is you want QUICK lease up to generate cash flow as you rehab and go along.
If you try to charge top rent it takes longer to get tenants and turn over is more because if people lose income they want to down size or move to save money.
At a cheaper rent you will get many more applications.You can then sift and sort the best possible tenants to sign up (no sex offenders,pit bulls,felony convictions,judgements and evictions,meets 3 time rent ratio for income,etc.,etc.)
It is key after rehabbing the place to get QUALITY TENANTS.By basing a low rent going in you will not be taking a bunch of time to lease up and getting desperate.This is when people just want to (fill the rooms) to pay the bills from the rehab.Then people trash the place and you need major repairs again and little to no cash flow.
Forgot to mention after the tenants have been there awhile and become attached to the place from you being a good landlord you can raise the rents closer to market but not at the top.
It will cost them so much to move and first and last month down along with security deposit.So they will weigh this versus paying another 50 or 60 bucks a month in a years time.Most tenants will opt to stay as they do not have THOUSANDS of extra cash today to move to save 50 a month.They do however usually have the ability to cover an extra 50 a month rather than move.
It just depends on who your tenant base will be.If the tenants are lower income expect more moving and higher amounts of trash each week from hand me downs.They constantly get hand me downs and they only last for a short time so you get a bunch of old TV's,couches,beds,tables,etc. that need to be thrown in the trash.
They are not supposed to but they will be dumped at your big trash bin or if you have small ones will be left on the road.You have to make sure you can get bulk pick up for your area.
Could go on forever.
For your first one you might want to buy one semi-performing before taking this on.The downside there is it will take awhile before you can get bad tenants out before performing the rehab but the upside is usually rehab costs are less than a totally vacant building.
