Deal Time!! Who you OR wouldn't you?

3 Replies

I'm looking at an 18 unit APT building.

Occupancy is low @ 66%. One reason is the property is in receivership so these guys really aren't to aggressive to stabilize the property, they just want to sell it per the banks request. There was a fire in the building in February, therefore those units that just got renovated haven't really got much exposure yet. (5) units are completely brand new after the smoke damage repair.

I am unable to get trailing data as it's now in receivership but I think I can make it work for the right price.. tell me what you guys think! I AM NOT UTILIZING PRO-FORMA, I am running the CURRENT operating data info & basing my offer price on so. The upside will be much more positive but regardless. Keep in mind the area is probably a solid "C" area. The buildings are pretty decent and clean inside. Tenants are good too. Not bad, seen worse. A few four streets over, the area is a little rough.

*****18 units*****

(1) unit is for an in house maintenance couple (free rent), responsible for make readies, landscaping, light and minor repairs. Tenants call him when there's an issue.

(11) units are currently rented for a gross rent of$5000 monthly ($450 p.month)

(6) units are vacant

Annual Taxes - $3700 ($310 p month)

Insurance yearly - $3500 ($300 p month)

Utilities for buildings - $750 per month (tenants pay ALL utilities, owner responsible for none except garbage)

Property Management fee (6% of gross) - $300 per month

Maintenance - $500 per month (regardless I have an on site maintenance couple, there are some jobs that require the Yellowpage companies, so I went on the higher side)

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There is probably $10k in deferred maintenance. All the units are in good shape and are rent ready. Looks like I just need the right system / team in there.

Asking price is $425,000

When the market was good, someone in 2006 purchased the units for $550,000.

Considering its in receivership, I believe I may be able to get a deal that's worth my time.

Let me know all your thoughts and your questions.

@Nik S.  

I've never seen a B or C class foreclosure multi-family property with just $555/per unit in deferred maintenance.  It's just never the case.  The properties are generally neglected for a very long time, well before they even go into receivership.  

You will also need to bump up your maintenance costs.  $500 month is only 6k per year which is really low for a C class 18 unit building.  

Is this close to your other building you are buying?  

Also that 66% occupancy is probably more like 40 or 50% economic occupancy.  I would account for 40% at take over.  

@Chris Winterhalter  

The listing agent said the appraisal stated "10k" in deferred maintenance but he said to triple it when considering it to make an offer ($30k). I'll be honest, I low-balled them and they countered @ 395k....

I am only interested if I can get it for $300k, wouldn't you agree?

No, these aren't near my other buildings but about 10 miles away from my store! For me, it's local which is nice whereas the other buildings I am buying are about 50 miles away.

I dropped the maintenance lower bc of the on-site manager taking over the responsibilities. So essentially parts only, as the labor is part of his duty. Now, figure he leaves at some point (been there for 4 years) then I would have to find someone to do the same duty, hopefully.

I am still justfyiing at $300k if it's feasible.

Father made an interesting remark... He stated that the area overall is bad...what if the "disease" spreads? Then what do you do... The building is in a small bubble of a small decent area... Surrounding neighborhoods/streets are bad..vacant & bad.

When some disease's spread unfortunately they aren't curable...

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