Need Help on deal analysis and price suggestion - 1st deal

Real Estate Deal Analysis & Advice
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Need Help on deal analysis and price suggestion - 1st deal

Naveen kumar Vadlamudi
Member since 2024 · 13 posts · 14 votes

Hello All, 

i came across this  college town property - it is a value add opportunity. 

14 Unit Complex - 12  2bed/1bath   &  2  1bed/1bath         * Separate electric and water meters. Central heat & air*

I made this below chart based on this community shared knowledge (Thank you all). 

Need 

 1.  would you consider this property at all ? if so why ?

2. can i pursue this opportunity and fix it to add value as a first timer? 

3. what is the good price+/-  to offer on this property ? 

Note: I know that it is currently bleeding  but given the price and fixing it up a bit ,may be a good one. I am open to take some heat so please give me honest and open feedback. 

Thanks in Advance

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  • Greg ScottPro Member
    Rental Property Investor · SE Michigan · Member since 2014 · 4k+ posts · 6k+ votes
    2y

    The spreadsheet you included is incomplete and insufficient for determining if this is a good deal or not.  Here are my comments on the analysis, not the deal.

    We need to know the total dollars you are bringing to this deal.  You only show the downpayment.  You are missing the following:  capital improvements, working capital, closing costs, pre-payments, and anything else you will need to pay in advance.

    You are missing several income and expense lines.  On the income side there are numerous things you could do to improve revenue but they are not listed.  You are also short on your expense calculations.  I would expect to see property management, admin, marketing, and contract services (more than just lawn care.)  You have an 8% vacancy factor, but does that include bad debt?  In my experience, economic vacancy is typically more than 8%.

    Your NOI calculation is not correct. Since the valuation of an apartment is based on NOI, this is critically important. Get this wrong at your peril. Debt service is not part of NOI.

    There is no calculation here showing your cash on cash returns, projected valuation, nor projected total returns.  I would want to see all of that before making a decision.

    With respect to the deal, $35K per door is a very cheap price these days, so it could be a good price. However, $750/mo rent for a 2BR unit is exceptionally cheap, so it could be in a bad or depressed area, so that price may not be so cheap.

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  • Naveen kumar Vadlamudi
    OP
    Member since 2024 · 13 posts · 14 votes
    2y

    Hello @Greg Scott 

    Thank you so much for taking time to review and provide insights. i have made adjustments to my analysis based on the provided feedback. here is the updated  Chart. please suggest if i am missing any thing else. Thanks in advance 

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  • Drew SygitBusiness Member
    Property Manager · Royal Oak, MI · Member since 2012 · 13k+ posts · 9k+ votes
    2y

    Your property taxes will probably increase after the sale. Contact the local Assessor's Office to find out how much.

    You state this is a "college town property", but the rents don't reflect that.
    The low rents typically are reflective of long-term tenants that the current owner hasn't raised rents in awhile. So, the current tenants are unlikely to be students.

    That begs the question, why not students?

    Is there an actual market for student housing or are you seeing a mirage?

    The $750 market rent for a 2-bed is also relatively low. 
    - Is this property in a Class C or D area?

    [email protected]248-209-6824
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