what do you think about this deal?

6 Replies

I have an opportunity to purchase a 20 unit building.  Price reduced from 235k to 200k for a quick close. Needs about 100-200k in rehab.

Selling by owner

Building is vacant

Zoning – Commercial residential

Asking Price 200K-Clean title

Cap rate of around 33%

Lot Size 88x60

Public parking in front of the building

Repair estimate 100 to 200k

Loans are available from lenders

15,000 Square feet plus 5000 Square feet in the basement

$2,500 in property tax a year

Each unit has its own electric and water meter

1 bedroom apartments – 16

2 bedroom apartments – 4

Previous rent roll on 1 to 2 bedroom is $550 to $700

Potential cash flow of around $130k+ annually

$14k in annual operating expenses / Sewer $50 per unit which comes out to $1000 per month. Non-occupied units are $25 a month. Management fees average around $12%.

Occupancy is expected to be very high through the use of government programs* Rent is paid directly to the owner*

Owner has 6 tenants standing by with interest on these units****

Please help me decide how to go about this deal? I feel I could offer less due to the cost of repair. Need help on how to finance as well. 

Sounds awfully inexpensive for a 20 unit building. What is the appraised value? What part of the country is it in? Do you have experience owning/managing a building like what you're describing? Might not be ideal for a new venture. 

"What part of the country is it in?" THAT is the question! 

ie. $20k/door for 1 bedroom units is too EXPENSIVE in many parts of the country!

Gotta ask: how did it get to be so bad, to be 100% VACANT?

And, how quickly might it get that bad - again?...

If it's too good to be true, it probably is.

How are you calculating that cap rate when it has no income right now? Pro forma I assume? You need to understand the history of that property to see why it is vacant. It will likely take you just as long to turn it around as it did for it to decline to such a state, if even possible.

Your potential cash flow seems way to high based on the provided rents.  Where you able to get bank statements or any documentation proving the previous expenses?

It's in Shamokin, PA.  I'm already turing this offer away. As a lot of the information I am receiving seems to be boggus. Per representative the ace was getting 450 to 500 per door. Which is primarily funded by section 8. The comps I'm receiving are also not accurate. Seems like someone wants to get it off their hands at the same time not budge on price. Their sweetening it up by making it sound like a great deal. 

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here