Deal or No Deal....

7 Replies

So I came across a commercial MF property in Midtown/Tobin Hill area in San Antonio, TX.  I called an investor form Austin for advice who I met in passing and he wanted to me to send him the figures and also the address.  Well, my spidey sense went off and I began to suspect he wanted all that info to possibly swipe this potential deal from me.  I don't have it under contract.  (Mama didn't raise any fools hahaha).  So I turn to my illustrious BP community.  I haven't verified any of this information so I suspect that I'll uncover some hidden truths but here it is:

- Asking Price - $800,000

- Gross Income: $112,000

- NOI: $96,000 (I know it seems high, I'll verify this for sure)

- 12 Cap

- Owner manages property himself

- 16 units each 450 sq/ft, all 1 bed 1 baths w/central A/C

- 100% occupancy (maybe an indication of rents being too low)

- No washer/dryer in units, has community washer dryer (Generates $125-$150/mo in revenue)

- Each unit rents for $575.  May be able to bump rents up another $50.  Remodeled 1 Bed/ba apartments at 550 sq/ft are going for $700 in that immediate area

- It's right by San Antonio College

  

An Update: Did a tax search and discovered he paid $14,925 in taxes. So that will definitely affect the NOI. Let's assume the NOI is $81,000 which will make it a 10 cap thus far.

Easy way to do this is ask if seller pays water??

If yes go 60% of expected and verified rents for costs with no rent concessions ( free months rent, waiver of security deposit etc. )

Example if tenant rent is 500 a month but first month of rent was free or half off then effective real rent is 458.33.

Even at 50% costs you are talking 56,000 NOI if no immediate deferred maintenance is needed.

800,000 / 56,000 = 7 cap

For this area that still might be good especially if rents are under market currently. If you get them down on price to 700,000 then you could have an 8 cap.

If this 16 units was built awhile ago you could have higher density available now and if you are sitting on land you can sell off later to a developer for a higher use or put more units on it yourself.  

@Joel Owens thanks for the information.  Yes he does pay water and trash and the tenants pay for the electricity.  I plan on meeting the owner in the next couple of days.  I'll definitely verify the figures via rent rolls and operating expenses.  If it looks good, then I'll go view the units to see their condition.  

@Eric Moore

 I live in Tobin Hill, depending on the location of the apartments it may or may not be a deal.  There are several small apartment buildings in the area.  There are also a couple methadone clinics, and the Salvation Army.  On the upside, there is San Antonio College, and the Main St. & St. Mary's strips.  Again, depending upon location, you may have a building that's rented by college students and millenials, or you may have a place rented by ****-bum dope addicts.  In my mind, it's a deal based on your tenants more-so than just straight numbers.

Is it a diced mansion or is it a legit multifamily construction? If it is multifamily, I would be interested in potentially buying it from you as a wholesale if that is your plan for it. 

As for the deal, you could call up this listing and try to get info http://www.loopnet.com/Listing/18789076/326-W-Cypress-St-San-Antonio-TX/. That would give you a guess on what they think market rate is. 

@Seth Teel thanks for the information!  I will keep that in mind.

@Will R. let's discuss further.  I'll PM you.

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