Rental Property Investor · Greenwich, CT · Member since 2015 · 4k+ posts · 2k+ votes
8y
@Dennis Johnson, can you clarify your question? Not sure what you're getting at. Current vacancy may impact your offer, but there are a lot of variables--mostly why the units are vacant.
Rental Property Investor · Greenwich, CT · Member since 2015 · 4k+ posts · 2k+ votes
8y
@Dennis Johnson, can you clarify your question? Not sure what you're getting at. Current vacancy may impact your offer, but there are a lot of variables--mostly why the units are vacant.
Rental Property Investor · Tampa, FL · Member since 2015 · 1k+ posts · 969 votes
8y
Hi Dennis,
You should create a multi-year budget to determine the purchase price. For example, if you plan on holding onto the property for 5-years, create a 5-year budget. You'll have 5 years worth of cash flow, plus the projected profits at sale (with the first few years having lowest cash flow as you fill up the units). I am assuming they units are vacant because they are out-dated, so you need to determine how much it will cost to update the units and how long that will take.
Based on your projected cash flow, you can set a purchase price based on your desired returns.
Also, keep in mind that the property will not qualify for institutional financing. You will need to purchase with all cash or secure a short-term bridge loan.
It is a lot more complicated than this, but this will give you a good starting place.
@Theo Hicks is nailed it. You're going to need a detailed development model as the property is currently not income producing. This differs from an acquisition drastically when modeling the debt service. If modeling by yourself, be sure to factor in a lease-up period consistent with the market and concessions that you might have to make when finding tenants quickly (free rent, etc).
Investor · Villa Rica, GA · Member since 2015 · 146 posts · 30 votes
8y
The current property is completely vacant needs to be rehab. Even though there is a suggested price, can a proforma be used to make a offer or use data from other properties in the area to get some general numbers
Dennis - A proforma is crucial to determine what you can pay for the property. Consider partnering with someone who has done this before. It's a great learning opportunity.
Rental Property Investor · Tampa, FL · Member since 2015 · 1k+ posts · 969 votes
8y
I would work with a local property management company in order to determine the stabilized operating expenses. You will have trouble basing those on the property's historical operations since it is vacant.