Rental Property Investor · Phoenix/Lima, Arizona/OH · Member since 2012 · 4k+ posts · 4k+ votes
Well, I don't know how many deals you guys are getting, but after 5 months, several hundred underwritten deals, and several best and finals, we finally are under contract on a 98 unit value add.
On the roof issue--it was installed in 2017. My guess is it was done by a licensed contractor with permits. If that's incorrect that's a problem and your request wouldn't be retrading, it would be correcting the seller's negligence. But let's say it was on the up and up, there could be a couple different things here: a) your inspector's opinion is just that--an opinion--and is on the picky side. b) this is a potential warranty claim for improper installation. c) the seller asked them to do it on the cheap and it will still function and not leak but isn't the best way to have installed it. My guess is it could be "a)" or "c)" so have you had a roofing contractor conduct an inspection for a second opinion? This also begs the question that if the roof permit was signed off and its not leaking, would you fix it? Probably not...until a problem arose, which may not ever happen.
As for the plumbing valves, if they aren't up to code you could ask the seller to fix them and bring them up to code prior to closing (and delay closing if necessary). This isn't a retrade, its a request in response to discovery of latent defects. If they say no, then it's your call. My guess is if you plug the $15K into your model it won't effect the IRR by more than a couple of bps.
On another note, if you are planning on raising rents $300, I wouldn't plan on this re-positioning being complete in 18 months. Most likely this will require close to 100% turnover as the new rents are too much for the existing tenant base to absorb. Could you physically renovate 98 units in 18 months? Absolutely, that's only 5.5 units a month. But on a 98 unit property that would be 5% physical vacancy just for units being renovated at any given time plus your normal vacancy. Plus tenants might move at an accelerated pace because of the increases and this could throw your occupancy pretty low and even into negative cash flow. Repositionings are always harder than they sound. It can be done, but if you plan for 24-36 months and then manage to get it done in 18 you'll be stoked.
Otherwise, I'll be in HI in early October? You have any plans?
Hilarious!! DL knows what he's talking about...
I'll miss you by a month, Ben! I'll warn Brandon so he can get out of dodge.
I am going to meet Brandon there. Taking Patrisha and kids. Celebrating @Darren Sager's birthday.
We can always make room for one more good person, and I guess since you come in a package with Suzi...but oh well... I'll just have to make plans to come see you