100 Unit Property Under Contract - Seeking Input from Fellow Investors
All,
My team and I @Matt Wood @Mike O'Connor @Kiran K have recently got a 100 Unit Multi-Family under contract in Albany, GA. As always, I would love to get your inputs on the deal.
Here are some of the key stats:
Purchase Price: $2.8M
Units: 100
Unit Mix:
50 3bed/2bath's @ $580/month
50 2bed/2's @ $425/month
Financing Approach:
80% Bank
20%
- 10% down payment
- 10% seller financing @5% with a 5 year balloon
Conservative Annual Financials Financials:
-15% vacancy
-Rent potential: $618,000
-Property Taxes: $30,000
-Insurance: $21,000
-Maintenance / Repairs: $60,000
-Water / Utilities: $68,000
-Advertising: $4,500
-Property Management: $52,530 (management fee and employee salaries)
-Garbage and Recycling: $15,000
-Landscaping / Pest Control: $18,000
-Security: $5,000
In summary:
-$525,300 gross income
-$273,030 total expenses
-$177,396 (5%) annual mortgage
oFirst 5 years: Seller financing repayment on 10% of purchase price @ 5% interest rate
Opportunities:
-Sub metered, but water is covered by current owner (~$55k)
-Increase rent on 2/2's to $485
We would love to hear your thoughts on the good, the bad, and the things we haven't considered or simply answer any questions that you have. Tagging @Joel Owens and @Ben Leybovich
Most Popular Reply
1. So - the 15% vacancy you refer to is economic + physical? If so, it's not enough for this class of property in my opinion.
2. Property management is grossly under-priced it seems. The management contract will cost no less than 3.5% of gross, likely 4% - about $25,000+. Then you need at least 2 full time people, likely more - unless you plan to post eviction notices yourself :). Very aggressive pay roll (which is on top of management) would be $900/door. Realistic pay roll a few hundred more. Sorry...:(
3. Where's the bad debt? Unless you think that $500/door tenants always behave properly...
4. There;s much more, but the big thing is this: What is your exit?
Here's some perspective, @Azeez K. I don't buy 4-plexes with $485 rents. Why - because I can't manage that class of tenant and keep my sanity at the same time. I sure as hell wouldn't try that with 100 doors...
Thoughts?