Vacant Apartment Complexes? and why unlisted?

8 Replies

I've seen some vacant apartment complexes, and it always confused me. I've now been presented an opportunity to buy a medium-large (44 unit) apartment complex... that is vacant. The numbers add up pretty easily- the area is rentable, fair rents, building seems decent. 

Now my problem is I don't understand WHY a complex would be vacant, void of major repairs. In this case however, while it could use some updates, the seller claims its fine . The weird thing though is the guy is really old (close to 80), and he has 11 complexes he's selling. 4 are vacant, and the other 7 are 20-60% capacity. There are no listings at the places that are even partially at capacity.

I did a little due diligence- there's nothing weird filed with the govt, no back taxes, no notices of it being uninhabitable.... just vacant.

I also don't understand why you wouldn't put a property like this formally on the market. I get unlisted apartment complexes with people in it, because you don't want them to know its for sale, but vacant?

I'm about to walk away just because the whole thing sounds "fishy", but I have read about people buying "vacant" apartment complexes when I search here. I love the idea of buying a complex like this, but it just doesn't add up. Can anyone on here weigh in? is it worth having someone inspect it? Help me understand!

Thanks much!

Perhaps the owner doesn't want to pay the expense to list his properties, perhaps he is burnt out on owning them?, seems like you might have a good value add opportunity there 11 complexes for sale, the vacant ones you could rehab and get market rents.

Originally posted by @Keith Ransom :

Perhaps the owner doesn't want to pay the expense to list his properties, perhaps he is burnt out on owning them?, seems like you might have a good value add opportunity there 11 complexes for sale, the vacant ones you could rehab and get market rents.

 The idea of getting market rents on a complex that large is too tempting- clouds my judgement. Effective cap rate at 28%? (50% maintenance).  Burnt is what it sounds like, I just have a hard time understanding how someone can get so burnt out they let properties go vacant.

Sounds too good to be true, so I might just buy a couple of the smaller complexes with existing clients since they have little risk (Positive cash flow from day 1)...

Or I could go big... 

I don't think I want to buy all the complexes even though I could pull together the money, so I have enough cash to cover risk/negative cashflow periods temporarily. 

@Brooks F. I have never come across a portfolio that big (11 complexes) that is so distressed and with a such low vacancy.

But, I have come across several properties and portfolios in similar situation. There was one about two years back, around 50 properties (SFR & small multi) where the kids inherited it from the dad. They were all paid off and the dad self managed. The adult children didn’t understand real estate or care to learn. They sold it off and at the price they got, it was a windfall because it was all inherited.

I have also run across older burnt out investors 70+ years old that are just ready to let the property go, and you end up with a great deal.

Perhaps you make a offer, and start due diligence. Then really dig into it.

I would definitely dig deeper into it rather than just assume it's too good to be true.

This could potentially be a grand slam deal so I would start doing further due diligence. 

Originally posted by @Andrew Kerr :

Brooks F. I have never come across a portfolio that big (11 complexes) that is so distressed and with a such low vacancy.

But, I have come across several properties and portfolios in similar situation. There was one about two years back, around 50 properties (SFR & small multi) where the kids inherited it from the dad. They were all paid off and the dad self managed. The adult children didn't understand real estate or care to learn. They sold it off and at the price they got, it was a windfall because it was all inherited.

I have also run across older burnt out investors 70+ years old that are just ready to let the property go, and you end up with a great deal.

Perhaps you make a offer, and start due diligence. Then really dig into it.

Thanks for the thoughts.

It makes a lot of sense. I'm going to go ahead and invest in an inspector to verify a couple of the properties. It sounds like it may be worth doing at least that due diligence.

I just don't want to get so blindsided by what looks like a great deal that I get myself into trouble, as I know a lot of people do.... they walk into walls because they think its the deal of the century.  I'd rather take a medium risk 10% than a high risk 25%!

Originally posted by @Brian Garrett :

I would definitely dig deeper into it rather than just assume it's too good to be true.

This could potentially be a grand slam deal so I would start doing further due diligence. 

 Thanks Brian!

I know a friend who has bought two of these in Jersey, albeit distressed areas but he ended up with great areas and is doing great with section 8 tenants now. Do your DD and don’t pass up for no reason! Send them my way if you don’t want them!

If you don't want to buy them all perhaps you could do a JV partnership with someone to purchase them, it certainly seems like you have a very motivated seller.

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