Buying new apartment with Upside - but need to change tenants
Needing advice on apartment...
I am looking at a 50unit apartment which is at a low cap rate of 4.5%, 6 million. Initial cash flow probably tight, but has upside potential with local community college huge expansion underway. This will bring traffic and community. Its close to desirable area downtown, but not in downtown.
Property itself is built in 1960s and has upside potential with renovating it both interior and exterior. The tenant mix isn't great when I drove by, low income and section 8. Worry about crime and limitations in increasing value.
Question is, if it is easy to renovate with tenants there already and increase the rents, by few hundred, which can drive out old residents and turn around the apartment and reputation.
Its probably looks like class C/D apartment in decent neighborhood, but just this block itself is out of place and kind of has run down look; even if I upgrade the apartments which may be 10-15k a door, plus some exterior upgrade, it still won't change so much the neighboring property which has some open parking lot and is trashy and some art store which is trashy.
Not sure where I'll go with this without experience, but just really wanting to invest because I see this has so much potential with being close to downtown and in middle of huge college expansion. But I am worried about my lack of experience and the tenant mix and the capital investment with these buildings which could have major problems, plumbing/cooling/structure/roof.
Thanks for your replies in advance.