I found a 100 unit deal at a cheap price per door but when I saw the T 12 the bad debt gets larger every single month… The last month the bad debt was 25% of the income. What would you do in that situation in today’s market?
Apartment Syndicator · Charleston, SC · Member since 2017 · 519 posts · 631 votes
3y
@Jay Ben If purchased at the right price, those deals can present great opportunities assuming that the property isn't located in a bad area. It's important to realize that property values are rapidly falling in many areas right now, so you need to make sure that you're getting a good price for the amount of risk that you're taking on.
It's very important to understand the cause of the bad debt. If it's simply mismanagement, then it could be a fairly easy fix (albeit one that will take time and perhaps some CapEx dollars). If it's due to the area that the property is located in, then stay away from it regardless of the price.
Apartment Syndicator · Charleston, SC · Member since 2017 · 519 posts · 631 votes
3y
@Jay Ben If purchased at the right price, those deals can present great opportunities assuming that the property isn't located in a bad area. It's important to realize that property values are rapidly falling in many areas right now, so you need to make sure that you're getting a good price for the amount of risk that you're taking on.
It's very important to understand the cause of the bad debt. If it's simply mismanagement, then it could be a fairly easy fix (albeit one that will take time and perhaps some CapEx dollars). If it's due to the area that the property is located in, then stay away from it regardless of the price.
I found a 100 unit deal at a cheap price per door but when I saw the T 12 the bad debt gets larger every single month… The last month the bad debt was 25% of the income. What would you do in that situation in today’s market?
Depends. Do you need the tax write off? There are so many variables, location, lender, condition, non-paying tenants and so on.
Generally, we want to look at the story of the property. Where is it located? How do the other properties perform around it (difficult)? Tenant base, jobs, etc. If it's property specific and we can potentially improve it then it might be a go. If its the location then maybe not so much. Bad debt is also one of the most difficult items to overcome and generally takes the longest.