Buying multifamily units with no tenants currently

8 Replies

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.

@Dennis Johnson

@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).

Best of luck with your project!

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

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.