Review and feedback on a deal in Sweden

7 Replies

Hello Biggerpockets family,

I am newbie to biggerpockets and RE investing, no previous experience in buying.

I found a deal that I would like some advice on. This deal on paper looks too good and when I called the broker he said that the landlord needs the money to start a bee farm. The location for this deal is situated in a smalltown with around 1000 inhabitants and the population has been decreasing steadily. Around 6hours drive from where I live. The challenge here would probably be finding new renters if the existing one leaves. 

It is 3 buildings, 1000m2, 16 apartments.

Asking price: 250 000$

Rents: 100 000$/year

Costs: 44 600$/year includes everything like, heating, water, electricity, cleaning, sewer, taxes, insurance, tv.

Let me know what you think and if you have questions. Thanks, Christoffer!

@Christopher Hunter without knowing anything about your market, type of building, condition, CAP rates etc. and assuming this property is fully occupied with long term tenants in place with solid leases this looks like a great deal.

It comes out at a 22 CAP which is unheard of in the U.S. If this is true and accurate operating costs it looks lie a winner from over here.

@Christoffer Huynh 16 apartments with a town population of 1000? Assuming family of average 3 rents each apartment, that accounts for roughly 5% of the population. It's going to depend on your markets housing supply, is the town population growing or shrinking, is the work there seasonal...? Too many unknowns but if you're actually accounting for housing 5 % of the population it could be either an amazing deal or terrible.

@Christoffer Huynh  without knowing anything about your market, type of building, condition, CAP rates etc. and assuming this property is fully occupied with long term tenants in place with solid leases this looks like a great deal.

It comes out at a 22 CAP which is unheard of in the U.S. If this is true and accurate operating costs it looks lie a winner from over here.

@Greg Dickerson Yes, on paper it looks solid. According to the broker there is 1 vacancy at the moment and most of the tenants are divorced women and families that has been there long term. I have not been on site yet since the long drive requires some planning. I am thinking of contacting the local bank and ask for appraisal and advice, do you think I can talk to tenants while I am there ? Buildings was built 1952 and have not been inspected by a property inspector. Also the operating cost does not take into consideration the salary for janitor other than that it should be included.

@David Stumpf Statistics show that the population is shrinking from 1960 - 2015, the work there is few and seasonal. But the actual population since 2015 - 2018 seems to have stabilized around 900. I can call the town office on monday and get the information regarding housing market and job situation. Anything else that I can check that you would do ?

Originally posted by @Christoffer Huynh :

@Greg Dickerson Yes, on paper it looks solid. According to the broker there is 1 vacancy at the moment and most of the tenants are divorced women and families that has been there long term. I have not been on site yet since the long drive requires some planning. I am thinking of contacting the local bank and ask for appraisal and advice, do you think I can talk to tenants while I am there ? Buildings was built 1952 and have not been inspected by a property inspector. Also the operating cost does not take into consideration the salary for janitor other than that it should be included.

@David Stumpf Statistics show that the population is shrinking from 1960 - 2015, the work there is few and seasonal. But the actual population since 2015 - 2018 seems to have stabilized around 900. I can call the town office on monday and get the information regarding housing market and job situation. Anything else that I can check that you would do ?

You need to get owners permission to visit the property and talk to the tenants. 

Originally posted by @Christoffer Huynh :

@Greg Dickerson Yes, on paper it looks solid. According to the broker there is 1 vacancy at the moment and most of the tenants are divorced women and families that has been there long term. I have not been on site yet since the long drive requires some planning. I am thinking of contacting the local bank and ask for appraisal and advice, do you think I can talk to tenants while I am there ? Buildings was built 1952 and have not been inspected by a property inspector. Also the operating cost does not take into consideration the salary for janitor other than that it should be included.

@David Stumpf Statistics show that the population is shrinking from 1960 - 2015, the work there is few and seasonal. But the actual population since 2015 - 2018 seems to have stabilized around 900. I can call the town office on monday and get the information regarding housing market and job situation. Anything else that I can check that you would do ?

 I wouldn't pay more than 2x net income for a building that nets $50k a year. Its barely worth anything as land and even then, its a tiny town with no growth.