Looking at a 7-Plex. Why has it been on the market so long?

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I'm looking at purchasing a 7-plex multi-family building. Asking price is 229k. The trailing 12-month NOI is 27k for a rough cap rate of 11.7%. Avg rent of $500 per door. That seems decent to me. Yet, the building has been on the market for over a year??? Why is no one interested?

The building is not in a horrible neighborhood. All seven units appear to be in decent shape (haven't done an inspection). All seven units are currently under lease.

Outside of some crazy structural issue that would come up in an inspection, why is no one interested in this property at what I believe to be an attractive ROI?

Happy to provide more info if anyone is willing to help!!

@Lou R.

There are many possible reasons:

  • NOI numbers in the pro forma are likely rosy ... a thorough analysis could tell a quite different story;
  • There may be other liens or defects in title on the property;
  • The building is facing functional obsolescence or is carrying too much deferred maintenance;
  • There is a forthcoming change in the local economy (major employer downsizing/leaving) or neighbourhood (redevelopment, highway or manufacturing being built close-by);

The list goes on, but it always comes down to a lack of value in the proposition: either there is a significant problem with the business or the asset which makes the acquisition costs unreasonable.

Now, sometimes this can be a good thing - if you are certain you have identified the issue(s) and know you can effective remedy them at a cost which the business could afford, you may have yourself a deal.   However, our experience has been that good multi-family deals are sold before they hit the street, so the biggest question I would ask is why other, more experienced investors, have taken a pass.