Touring a 12 plex

14 Replies

Hello

Touring a 12 units tomorrow at 10am with a agent, property been on the market for 1 year, currently just two tenants. From what the agent told me a family owns it, but I discuss they never cared to update units or get more tenants overt he year.  two buildings 6 units each  priced at 225k each totaling $450k.

I am wondering where that $22k would come from, if there is only two tenants now, landscape need some tlc, looked through window units need updated from what i can see. 

What things should I asked or look for when meeting with agent tomorrow?

Checklist!! -- all kinds of things.. HVAC. state of each unit? Go thru each unit and see what needs to be done to make them rentable. is there a past rent roll? Sounds like room for negotiation with only 2 renters...

Abou;

I have experience in buying distress 8 unit with two tenets.

The 1st thing I did was to visit each unit make detailed notes as to what was needed to bring that apartment back to life to attract the higher end renter.

Than, inspected the foundation and the roof, attic, common areas, went to court house looked up records on property, spoke to building inspector,They usually have some inside info on things that nobody else has.

While doing the above, find out what is market rent is, this will help determined cash flow after repairs.

What I did to get renters in, as soon as I finished remodeling an apartment I started advertising for rent with a lower rent rate then others in the market, the idea is to get her fixed up and all unites occupied, as soon as that happens you can start raising the rent. 

Don't just put a body in there to put a body in there, you wont have the time, energy or money to evict at this point.

Take cost to remodel plus cash flow to the bank with your asking price, if you can get a pre approval to buy the property than present your offer with what is needed to spend on property.

It took me a year to get the bank to take my offer, once a month I would stop by just to say high, they had other offers, but then they would go to the building find out what a disaster it was and either walk or change the offer, the bank always said no, why you ask, because not one of the offers came with a pre approval, unbelievable, cash talk BS walks.

The Bank I received the loan from looked at the remodeling numbers than market value after completion, I took the banker on a tour of said property showed the my written plan and bingo, he says this is a great deal. BOOM.  

Like I said, took me a year to land the 8 unit, it can be done, you have keep working it out.

Sorry for all the blah blah above.

Mike

questions I would ask issue much are taxes land utility bills. what are other rental comps in the area getting. Is it close to local public transportation. Why have they only rented out only 2 units out of 12? I would look very closely at ceilings as well as floors for any warping. Check out the roof, windows and foundation. Examine the systems ask when they were installed look the maintenance of the building.

@Robert Nason     I toured the property today, the agent said the reason for the price base on the state/city assed price. In other words so has no basis for it, that is why they stated " Buy as is" but they wont work with me.  The wife husband owned it for 40 years and its free and clear, so she is sitting on it and the ball is in her court not ours but I WONT GIVE UP! this is mine ha. 

 Current rent base on centimeter is $850 for two bed and $650 for 1 bed unit which the property only as one.  The units need some work, carpets, new counter tops for some and other can be touched up. Bathroom from look of thins just nasty and dirty looking but could probable be saved. But have not taken an inspector to do the heavy inspection just me. 

Thursday I am heading there with a mentor who is experienced to tour the property with me, but the second property would be financing such a deal, bank wont touch this how would I go about this? 

* agent said owner wants to sell "As is" for $225k per building. 6 units each building.  All gas, owner pays for hot water and heat.  Build in 1968 State of Rhode Island, Providence appraisal was $256,200 I believe this is where she got $225k from because I don't see any other metrics they would use to come up with $225k with current conditions and only 2 tenants out of 12 units, reasons being current owners wife doesn't care or interest her she just wants $225k. Since its paid off ball in her court, and property been on market for 1 year. ANY SOLUTIONS? 

Questions: 

1. Since its listed, and not in agents interest is owner financing still                                                

l doable? 

2. How to go about financing such a deal, where bank may not touch?

3. How do I get this deal long term with?, can I speak to owner with out agent?

4. How would I value property with only two tenants?

@Mike Campbell     @Sarah Seaton

I toured the property today, the agent said the reason for the price base on the state/city assed price. In other words so has no basis for it, that is why they stated " Buy as is" but they wont work with me.  The wife husband owned it for 40 years and its free and clear, so she is sitting on it and the ball is in her court not ours but I WONT GIVE UP! this is mine ha. 

 Current rent base on centimeter is $850 for two bed and $650 for 1 bed unit which the property only as one.  The units need some work, carpets, new counter tops for some and other can be touched up. Bathroom from look of thins just nasty and dirty looking but could probable be saved. But have not taken an inspector to do the heavy inspection just me. 

Thursday I am heading there with a mentor who is experienced to tour the property with me, but the second property would be financing such a deal, bank wont touch this how would I go about this? 

Questions: 

1. Since its listed, and not in agents interest is owner financing still doable? 

2. How to go about financing such a deal, where bank may not touch?

3. How do I get this deal long term with?, can I speak to owner with out agent?

Quick question.  Are these two buildings on Douglas Ave?  If so, I've been inside of them, and I can elaborate a little more.

A 12 unit rehab may be a lot to bite off if you're a bit green. If it's been on the market that long I'd be curious as to why other investors haven't swooped it up, even for all cash.

The agent isn't going away so I wouldn't burn that bridge by trying to go around them. They are sales people and they need to close deals...that's how they survive. Channel that motivation to get them to work with you.

If I were you I would try to see if the sellers would be willing to participate in the financing. Even if they could hold a 6-12 month note with a down payment sufficient enough to pay their closing costs and broker fees then you're in a good position to reposition the asset, increase NOI and then put long term financing on it.

There's a lot of due diligence to do in the mean time. If @Brandon Ingegneri has been in the building and gone down that path I would give him a call to talk about what's going on. Always good to network and learn at the same time.

@Brandon Ingegneri  Yes it is!. Can I give you a call tomorrow around 6pm to discuss?.  I a interested with 4 partners, but I feel like we are missing something or don't have all the pieces to the puzzle.  Owners reasons and story and price doesn't make sense!. Would like to hear your thoughts on this. 

Neal C. Thank you for the advice, I am a bit green, but and have some four partners hopefully doing the deal with me. I do not want to burn the agent or go around her she is needed, but I feel like there are things missing or not making sense?. We plan on offering her deals and see which one we can all agree on. Since they own it outright we want to do owner finance and some cash if possible.  I will update on this, but one thing for sure I am acquiring this property. 

yes, you can call me. I was going to buy the entire thing, but she wants all the money. They just won't cash flow unless you come out of pocket with big money. Then your return isn't even that great there when you figure the taxes. Tons of turn over with one beds in that area. It will be a headache. I live 5 minutes from there so I've had my eye on them for a while. We can discuss at your convenience. 

@Brandon Ingegneri Hello Yes she wans too much for them, she is not als willing to work with you unless its $450k. Bu when would you have a empty property sitting with 20k over your head? in taxes to pay?.

Since you live close I would like to meet with you by the house today if you can, if not a phone call will do.  nevertheless a problem I want to solve but not for $450k who ever pays that price wont see that money for a while.

@Brandon Ingegneri you are right about one bed room, most people today have kids, or living with or taking care of someone. And parking on site is a must for me, this property is a value play but the price and condtion dont match. But we will see if she takes our offer.

unless someone is in a super hot market, a buyer should only pay for existing tenants and income. if you as a buyer are doing all of the rehab and lease up to get the building full, then you should get the benefit of the forced appreciation from your efforts. 

Sounds like the seller thinks they are entitled to this value, which suggests to me why the property has been on the market for so long. 

Originally posted by @Abou C. :

@Brandon Ingegneri you are right about one bed room, most people today have kids, or living with or taking care of someone. And parking on site is a must for me, this property is a value play but the price and condtion dont match. But we will see if she takes our offer.

 Abou;

Don't let your emotions get attached to the building, there are asking to way to much, so let them sit on it or someone else will come buy and be foolish. 

As stated above, 1 beds have a big turn over this must be calculated in your Vacancy rate, if that lowers the cash flow, than so be it, the build is worth what the numbers say it is and that's it.

I have been looking at several building of late, the owners are way out there, one would have to come in the deal with 50% or more down to make the numbers work.

Even when I come in and sit with them show them what works and what doesn't with the numbers, they say, well you just need more cash down, it's nuts I tell you. 

keep an eye on the building, watch for the realtor sign to come down, which will eventually, than contact the owner and start talking, create a relationship, this all will take time.

As they say, KEEP AN EYE ON IT. 

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