Would you do this deal?

[Jeremy Holcomb]

32 units that need major renovation. The asking and repair price is over my rule of 65%. However, these are two bedroom units and I would section 8 them under market rent to fill them quickly. In the loan portion I included cost of renovation and purchase price due to I would borrow the renovation money as part of my loan. The cash flow alone seems to make it a great deal. What do you think? Also, do you think a HML would lend with it being over 65% value due to the return rate and cash flow.

[Spencer Gray]

What about PM fee? Cap ex reserves?

 Is 5% vacancy economic or physical? What are you basing the property tax figure off of? That seems like a very round number and I've never had taxes and insurance equal each other. 

5% vacancy means that only 1.6 units will be vacant on average throughout the year. While that is possible I would use at least 10% economic vacancy to account for turn over, loss to lease and any concessions. Also, if this is a major renovation you're likely to see much lower occupancy during the rehab. 

Without a deeper dive these numbers don't seem right.