Rental Property Investor · Miami Beach, FL · Member since 2016 · 52 posts · 2 votes
Hi Everyone,
I am looking to do my first commercial deal. I currently own residential multifamily and I want to get into commercial due to the scale you can get and Control Value.
In order for my strategy to work though, I need to be able to secure the correct first deal: Value add 5-Unit under $500k
The goal would be to force appreciation, elevate cap rate, and flip the building to another investor. Profit, 1031 exchange into a larger deal.
The reason for this price is I am shopping on what I can put down for a down-payment WITH a partner.
Investor · Morrisville, NC · Member since 2012 · 1k+ posts · 673 votes
8y
@Leo Maldonado I'm assuming these numbers you are sharing are the marketing version of the data (provided by seller of broker), correct?
If so, then you really need to update them. Expenses are just around 25% of income? You are being lied to.
There are tons of other expenses you need to account for. Knowing FL properties, this is probably an old property built in the 60s or earlier. What would you do, if the HVAC goes down? What's the age of the roof? When someone moves out, how do you bring someone new in? What are the costs? I'm assuming you managing yourself?
Rental Property Investor · St. Petersburg, FL · Member since 2017 · 3k+ posts · 4k+ votes
8y
I think the first thing to do is to find out if 8.3 is a reasonable cap rate for the area. Then you do one of two things, lower expenses or raise income.
Yes you are right, I plan on setting aside 5% Vacancy and 5% Repairs and maintenance every month for that. Nothing aside for CapEx as we plan to flip the building in a 5-year holding period.
Investor · Morrisville, NC · Member since 2012 · 1k+ posts · 673 votes
8y
@Leo Maldonado I'm assuming these numbers you are sharing are the marketing version of the data (provided by seller of broker), correct?
If so, then you really need to update them. Expenses are just around 25% of income? You are being lied to.
There are tons of other expenses you need to account for. Knowing FL properties, this is probably an old property built in the 60s or earlier. What would you do, if the HVAC goes down? What's the age of the roof? When someone moves out, how do you bring someone new in? What are the costs? I'm assuming you managing yourself?
Rental Property Investor · Concord, CA · Member since 2016 · 499 posts · 219 votes
8y
Leo Maldonado u need to account for PM, maintenance, vacancy etc in your numbers as Cap rate may be much lower at the current purchase price if you include those numbers. Also CapEx can happen during the 5 years you hold the property.
Methuen, MA · Member since 2018 · 26 posts · 14 votes
8y
I owned a 6 unit small retail property many years ago and one thing that hurt our cash flow is when a tenant left the space sometimes stayed open for a few months at a time unlike a multi-family.