Updated almost 11 years ago on . Most recent reply
Wholesaling a turnkey 9-unit building
I have a situation in which I may be able to get a nine unit building under contract for a price that would equate to an 8% capitalization rate. The capitalization rate for the neighborhood, and in fact the city and county, is at highest 5%.
Translated into dollar figures, I may be able to get a property under contract for $725,000 when in fact, assuming a 5% capitalization rate, it's worth well over $1.1 million.
The property needs no repairs and is fully rented with long-term leases. And when I mean long-term, I mean at least a year.
Given this, there is no "after repair value," so to speak. There is only the discount to fair market value.
In short, is this something worth my pursuit? I would have to assume that if I can get it for $725,000 and it's actually worth over $1.1 million, there must be someone out there willing to buy, right?
It's like buying a brand-new $75,000 Corvette for $50,000...I'm sure someone would want that...
Or am I totally off base here??
Most Popular Reply
I would definitely take that new Corvette for 50k from you. (Have you seen the 2015 z06.... Oh my!) I know people flip things like this pretty regularly. It could be worth possibly doing an option? If you have any local REI clubs I would run it by some of them.