64 unit in Submarket of Portland/ Vancouver calc looks good!

[Paige Kelsey]

This looks interesting. I entered in asking for this property as the price and did a rent comp on the units. It appears that each unit is under market rents by at least 50$. CAP rates for the area are 6.8. This property is within a mile or so to shopping centers and is in a growing market. What do you think?

View report

*This link comes directly from our calculators, based on information input by the member who posted.

[Mike Nuss]

Good morning @Paige Kelsey....here are my thoughts. I hope they're helpful. Please consider this an opinion/constructive criticism at best. 

1) The financing numbers are pretty unrealistic from what I've dealt with the past two years in commercial loans. 0 points, 75% ltv and 5.5% interest with 30 year am won't happen. The interest may be realistic, but you'll be looking at a 25 year am with 10 year balloon at best. The DCR overlays will probably bring your ltv closer to the 65% ltv range and you're going to be paying atleast 1 point at closing and 4-5K on the appraisal, so expect closing costs to be much higher.

2) Investors bringing 1mm+ to the table won't settle for a 10% ROI at exit strategy. The ROI, including exit, needs to be more like 20% year over year, in order to attract that type of capital.

3) Never ever invest in real estate that results in a negative return after a year 1 cash out. 

4) 100K in repairs is less than 2K per unit....I don't know the Longview labor market at all, but I assume you're not doing much with that type of budget. 

5) $50/unit rent increase is nice on 64 units, it does result to a significant amount of gross $  "equity", based on a 7.6 cap rate. However, that results to less than 1% increase in value. Reposition purchases should be increasing value by a minimum of 30%....although this doesn't sound like a value add/reposition deal. 

In my opinion, the price needs to be dropped over 500K (maybe more like 1mm) in order for this to be an attractive investment and not considered pure speculation.....and I don't think Longview is a good speculation market. It can be a cash flow market, but speculation is better suited for metro areas like Portland that have a history of consistent appreciation. 

Again, please take this as constructive criticism. I really dislike negative attitudes and posts. I've read some of your past posts.  You bring a great attitude and good knowledge to the table. I just thought I would chime in on this one in hopes that the above points bring some more perspective to your analysis on these types of properties.