I have stumbled across a potential off-market 8 unit property in Macon, GA. I was calling on a duplex for sale in my farm area of Augusta, Ga and the owner mentioned that the duplex I called about had already been sold, but he had an 8 unit property he would sell in Macon, GA.
We currently have 2 SFR's and a Duplex in Augusta, but would like to get into larger properties if the opportunity is a good one.
The 8-unit property is 3 separate houses divided into 8 apartments. Within walking distance of the Mercer Law School and in the historical district.
I am having a difficult time determining an appropriate cap rate to get a valuation. Is there anyone out there with some knowledge of Macon, GA? Should I just call brokers in the area and ask about cap rates?
Rents are $4,100/ mo. when fully rented, but 3 units are currently vacant. Tomorrow I plan to ask for trailing 12 month finances and a rent roll.
It seems like a mom and pop type operation with room to improve management. The owner is retiring and wants to be done with the property.
Any guidance regarding how to proceed would be appreciated.
Thanks in advance,
Winn and Kaitlin Merwin
Thank you for your response.
I agree in that I have my own criteria and can identify a good deal in my market. I have been able to put in offers on SFRs and Duplexes in Augusta before seeing the property because I am so familiar with the area.
With Macon being a new market for us, and the property being 8 units on a single plot, I am trying to identify the value of the property after stabilizing it. This would allow us to know if we could sell it if we decide we would rather continue to invest in Augusta instead of Macon. It is my understanding that this would be a commercial property which is valued much differently than the previous homes we have purchased.
Do you have any apartments or rentals in the Macon area? If so where?
Have you worked with any of the management companies in Macon? For example: Fickling and Co. Management services, Mega Agent rental Management or Active Property Management LLC?
Generally sellers will not disclose T12 or rent roll information until you're under contract. So don't be offended if they turn down your request. For multifamily, financial due dilligence starts after contract is signed.
It sounds like you have most of what you need to model your offer price (rents, vacancy, expenses). Call a broker in the area or get access to commercial real estate web sites to get an idea for cap rates in the area. Then submit a LOI based on that.
You need to get any type of financial data that you can. Cap rates for a smaller apartment complex are not used very often.
I would get his income, expenses and try to derive the NOI. there are countless factors that can affect this deal.
This sounds like a classic owner financing deal. Find out what assets have been trading for in your market.
I agree with @Gino Barbaro . As far as valuating a deal in the Macon market, my general rule of thumb is the 2% rule, but that will vary depending on area. Macon varies greatly by location. I don't particularly like the area around Mercer as it tends to be older homes with a lot of variation in the condition of the properties.
@Winn Merwin I don't have any apartments, but I do have some SFH in different parts of Macon (South Macon, off of Rocky Creek, off of Ayers Rd, and East Macon).
Thanks for the information. They actually did send me all the rents and expenses year to date as well as vacancy and 2017 total rents and expenses. At least it is what the PM has. It did not include Taxes or insurance or a few other items that the owner paid for himself. I plan to reach out to a local broker or 2 as well. Thanks
Thanks for the input, I have listened to you and Jake on #182 quite a few times. The more recent #266 was great as well. Thanks for the willingness to share. I should have a decent idea of income and expenses. I wanted to get a better Idea for a ballpark offer price before asking about owner financing. Does it sound "like a classic owner financing deal" because it would be difficult to get bank financing in this situation? I have not yet sat down with my banker.
2% would be nice. And you are right about the age of the homes. They were built in 1890-1900. There is new construction 2014-2017 along Cherry St. (including next door) which was sold in the low to mid 200K range. This has me thinking that it may be a better location than some areas of Macon. The "heat map" on Trulia showed that the property is in the lowest crime zone for a few blocks all around.
It appears that your properties are 5-6 miles from where I am looking. Are you getting 2% rule rents/purchase in those areas?