Can you analyze this property for me?

6 Replies

I recently started learning about multi famialy properties and i was looking around my area to see what is for sale. Can someone with experience with multifamialy tell me if something like this could be a good deal? What should i look for in multifamialy properties? Can someone mentor me about multifamialy properties? So for example look at this property https://www.marcusmillichap.com/properties/aOyRC8c...

Hi Kyle and welcome to the world of multi-family apartments! There are many things to look at when determining if something is a good deal in regards to apartments. Things from negative externalities, occupancy of the prospective property, occupancy of the area in general, unit mix, condition of the property, what class it is and the cap rates associated with those assets in that particular market, etc...

I didn't see an occupancy figure in their summary. Sometimes they give the unit mix and unit availability but not the occupancy. You can then work forward and determine what the occupancy is for the property and which units they are having a hard time filling. At that point you can try and see if these are problems with the units themselves, property specific (management) or represent a more general trend in the market having difficulties filling a unit type.

All of their units are 2 bedrooms so that concerns me.  You have zero redundancy if the market favors 1 or 3 bedrooms. You can always adapt but it's pricey and most of the time not worth it.  I'd suggest calling the broker for occupancy percentage. I'm familiar with this area. It's east of Suitcase city so extremely transient tenants won't be a problem but the last time I checked it was populated by probably 40-50%, as an educated guess, by students. Call the local apartments that are comparable and let them know what you are doing. Most will freely give you information about their occupancy, rates, concessions, thoughts on the market if you promise to reciprocate and send them back the information you've gathered from others. They perform this task routinely and having someone else do it for them can free up an afternoon for a listing agent, managers like that they are available to show apartments and not have their noses stuck in the computer.

Just because it is populated, last I looked, heavily by students doesn't mean it's a deal breaker especially as it is in Florida. You can call local places that specialize in having the snowbirds for the winter and those that specialize in housing young people coming to enjoy the beach in the summer but it will take work. If you don't keep those units filled you can kiss your NOI goodbye, maybe even your investment. Also bear in mind that this is a lot of turnover. This will greatly increase your expenses but it beats empty units.

Before you jump right in I'd have a competent real estate attorney, a CPA that specializes in real estate and a property management company you'd like to go with. The last one is going to depend on which type of investment you'll go for. Get the right property management for the right class of asset. You'll rue the day you picked them if you don't follow that advice.

This is an excellent book to get you started:

http://www.appraisalinstitute.org/the-valuation-of-apartment-properties-second-edition/

Also check out:

http://www.irem.org/

@Dave Bingham  Thankful for all the information. I will look into what you said. 

Yeah, we did a couple of smaller deals on the west side of 56th. The area is not as bad as suitcase city area, as Dave explained, but it is definitely a lower end working class neighborhood and tenancy can be a challenge.  Are you planning on managing yourself?  

@Eric Odum  asked the critical question. You need to @Dave Bingham  follow Dave's advice and set up your strategy against this opportunity.

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