7 unit or 6 unit Deal?

Question

Hi all, I'm working on 2 separate deals that pencil out well but I'm not sure which to do. For reference, I've only got funds for one.

The first deal is a  value add 7 unit (1/1) in South Carolina, B class with lots of upside and is seller financed. One thing to note is this isn't in my current market (NC).

Purchase Price: $625,000

DP: $125,000 + $40,000 in 15 months

Current Monthly Cash flow: $1175

Proforma Monthly Cash flow: $1900

Renovations: $80,000 (entire building)

CoC: 10%

ARV: $980,000

The goal is to increase NOI over the next 3 years and cash out refi in order to get my down payment out of it.

The second deal are 6 units across 3 duplexes in my town in NC, C class neighborhood. I'd be using a hard money lender & intend to refinance into a long term fixed rate loan.

Purchase price: $390,000

DP: $64, 200

Current Cash flow: $628

Pro forma: $1483

CoC: 22%

Renovations: $15,000

ARV: $480,000

I appreciate any feedback!

Mike D'Arrigo · Answer

@Cindy West The first thing that jumps to mind is that deal #1 is a much larger renovation and is not in your home market. Deal #2 is a smaller renovation and is in your home town. I would say that if deal #1 was the smaller project I would recommend that one, but my concern would be doing an $80,000 renovation from oout of state. How do you intend to manage that? You'd be taking on  substantial risk.

Scooter Williams · Answer

Seems a bit $$ per unit for cola. iMo .

Brandon W. · Answer

@Cindy West

Hi Cindy! I’m in Columbia and would also love to hear the details. Let’s connect!

Brian Poirrier · Answer

@Cindy West, sent you dm!  If you are interested in assigning the Columbia, SC deal, I'm actively looking to purchase more MFR myself.

Cindy West · Answer

@chris

@Chris DeTreville Hey Chris, it’s right in Columbia,

Chris DeTreville · Answer

@Cindy West where in SC is deal #1? I may be able to help.

Cindy West · Answer

@Greg Kasmer Thanks Greg, it looks like a major factor will be the renovation and not being boots on the ground. I definitely might try and partner up with someone locally!

Cindy West · Answer

@Justin Moy Thanks Justin for your input! Great point on distinguishing both budgets as one will likely be more of a challenge than the other

Greg Kasmer · Answer

Cindy - I would say Deal #1 is the priority if you're looking to recycle your money as soon as possible as that (to me) has the greatest opportunity to drive value in the short term by increasing the NOI of the property. However, since it's out of your area do you know the local cap rate in the area so you know you're not overpaying? Also, do you have a contractor in the area to execute the plan? I agree with Justin that controlling the renovation will be an important aspect to that project. Perhaps you can partner up with someone locally to help manage the project? Just a thought... Good Luck!