25 Units with potential rent Increase and RUBS..11.35% return

5 Replies

Hi BP community,

Let me know whether you think this is a good deal. A 25 units MF property with 5.26% current CoC. My analysis shows that if I do rent increase and RUBS of water, I can bring the CoC to 11.35% and get 48% of my cash back in 12-18 months. The returns seems to be low or "normal" compare to the usual SFR space that I am used to. I am thinking of passing on this deal due to the low excitement that i get from the potential returns. My dilemma is , is this "Good" return in this hot seller's market . Could this be a good training wheel project in MF space ? .Am i passing up a good opportunity here ?

James and Shanti

How would you get your money back in 12-18 months with an 11.35% cash on cash return?

Dave

@Dave Khalsa

 Hi Dave, The way to get your money back is to increase value in MF after value add. Then you refi it out at higher value. That is the one of the key value of MF investing. If you do a search on MF value add you can read more about it.

James and Shanti

@James K.

I wouldn't want you going at this from the frame of not wanting to lose the deal. You want to stay sober.

It's ok not to lose money and take the next pitch.

Do you like the area, tenant profile, and future growth potential? Is the neighborhood trending up?

The Tenant profile is ok. The area is in a good  location and has good long term growth potential. @Al Williamson Do you think this will be a good project even though my expectations of return are higher ?

James and Shanti

Yes. If if you're willing to break away from status quo operation, you can far exceed your NOI estimate.

I recommend that you don't operate all 25 the exact same way. Set a couple units aside for experimentation. 

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