Investor · Albuquerque, NM · Member since 2016 · 10 posts · 2 votes
So this deal is as such:
545k, plus 19k to the wholesaler.
14 units of efficiencies, 2 units of two beds.
2015 gross was 101k, plus 4K from laundry coin machines.
NOI was 61k, landlord pays all utilities for the efficiencies, though they are separate metered for electricity.
Location c, class c.
Rents are slightly lower than market.
Efficiencies are charging average 550, two beds are at 575.
Just did the inspections yesterday, no major structural or roof issues, but definitely deferred maintenance in all units, bathtub are in horrible shape, tiles falling off the wall, carpets are nasty and the floors are very old. Fridge and stoves seem to be in working order.
Is this a good deal?
Need to put an offer in soon.
No room for price negotiation though.
Thanks
Lender · San Antonio, TX · Member since 2016 · 1k+ posts · 1k+ votes
10y
@Huan Yang you might want to verify that there is a reputable property manager willing to take that on. I looked very seriously at a 24 unit complex in Waco that sounds very similar to yours, and I talked to at least 6 different property managers in Waco that said no, they wouldn't take it on, even though I have way worse stuff on the gulf coast and PMs lining up for my business there. Just a thought.
Real Estate Broker · North Richland Hills, TX · Member since 2013 · 1k+ posts · 607 votes
10y
B/c it's a starting point to screen prospects. If you're so closed minded as to only see things the way you've done so since before the dawn of time, I feel sorry for you. If I'm looking for a 10 cap buy, I'm not going to bother messing w/ a seller who's priced at a 5 cap, b/c we're too far apart and it's going to be a waste of both parties' time.
Nobody's going to evaluate what to offer based on asking price, no need to be such a blowhard about it.
Investor · Honolulu, HI · Member since 2013 · 3k+ posts · 1k+ votes
10y
Geez, you'll never get to the buying part if you are starting with arbitrary "screening" processes. Are you one of those fraidy cats that put a bunch of convoluted road blocks up so they never have to actually invest?
Seriously, the screening you should be doing is market value. If you can't afford over a certain amount then sure screen them out. Everything thing within your price range is good to go. If your market is 10 cap then make your offer at ten cap and quit worrying about asking prices. The seller is not going to sell at a 5 cap. If he's fishing then cut bail. When he decides he wants to sell he may even reach out to you for your MARKET offer. This ain't rocket surgery.
Lender · Dallas, TX · Member since 2015 · 283 posts · 128 votes
10y
Reality Check;
Forget your cap rate and focus on the actual money.
Your expenses will probably be in the $3500 per unit range - that's about $56,000 annually.
yes you might operate for less but that is why it has deferred maintenance.
Laundry income should not be included when comparing cap rates to other projects unless they also have similar arrangement. Either way, who owns the equipment and what's the cost off upkeep?
Texas is a "mobile" community - turnover statewide is close to 50% so budget accordingly.
From the sound of it, your deferred maintenance will cost you over $2500 per unit o cure. you need to see if that can get covered in your financing, if not you leverage might not be as good.
Lastly, if after you recalculate, the cash on cash makes sense given the work that this deal will require, then best of luck. Make sure you develop an exit strategy as part of your analysis so that the work you do going in is targeted to that - no - buy and hold is not a strategy, every investment has a lifecycle (some longer than others).