Is this deal too much for me?

8 Replies

I'm 21 years old and I have been searching for awhile for my first deal but it always seems like something is coming up and delaying things. I recently came across a 68 unit apartment complex (48 apt. 20 Condo)
with an asking price of 3.2m. I feel like its bigger than your normal first step and its almost common sense to think its too much and I shouldn't waste my time even thinking of it. But if the numbers all make sense why not right? Below are the Numbers I've gathered:

48 APARTMENT COMPLEX – PARK LANE APARTMENTS

20 UNIT TOWN HOUSE COMPLEX – NORTH COLONY TOWN HOUSES

202 – 208 NORTH MAIN ST., NORTH SYRACUSE, NY

PARK LANE APARTMENTS

16 ONE BEDROOM APARTMENTS

32 TWO BEDROOM APARTMENTS

RENT INCLUDES HEAT AND HOT WATER

LAUNDRY ROOMS – 8

NORTH COLONY TOWN HOUSES

20 TWO BEDROOM, ONE AND ONE HALF BATHROOMS

BASEMENTS WITH WASHER/DRYER HOOK-UPS

TENANTS PAY ALL UNTILITIES

WATER IS SEPERATELY METERED (TENANTS COULD BE BILLED FOR USAGE – NOT CURRENT POLICY)

CONDITION OF PROPERTY:

PARK LANE:

ROOFS NEED TO BE REPLACED

WINDOWS NEED TO BE REPLACED

NEW BOILERS WERE INSTALLED IN 2009

DRIVEWAY NEEDS TO BE RESURFACED

ALL APARTMENTS AND COMMON AREAS ARE IN GOOD SHAPE


NORTH COLONY:

ROOF WAS REPLACED IN 2009

WINDOWS WERE REPLACED IN 2009

DRIVEWAY NEEDS TO BE RESURFACED / REAR OF BUILDING NEEDS PAINTING


FINANCIALS:

OFFEERING PRICE $3,200,000

REPAIR INVESTMENT FROM SELLER $200,000

-SELLER WILL GIVE BUYER $200,000 AT CLOSING FOR ABOVE LISTED DEFERRED MAINTENANCE ITEMS


PROFORMA P&L - MONTHLY

RENTS @ 100% $44,000

LAUNDRY COINS $1,100

MONTHLY INCOME $45,100


EXPENSES

MORTGAGE - $2,560,000 @5.5% FOR 25 YEARS $15,721

PROPERTY TAXES 9,700

PROPERTY INSURANCE 1,600

ELECTRIC & GAS (2013 ACTUALS) 1,700

WATER (2013 ACTUALS) 1,300

VACANCY ALLOWANCE – 8% 3,550

ALLOWANCE FOR MAINTENANCE 2,500

($36,071)

NET MONTHLY CASH FLOW $9,029

17% RETURN ON INVESTMENT OF $640,000

A few things to note. I am aware these numbers are ProForma and I will be doing my due diligence to get proper records but I believe the numbers show promise and deserve to be looked into at the very least. I have visited the properties and even managed to get into one of the condos as well as spoke with several residents and everything stated above in regards to the maintenance and rents seems to be true and he left nothing out that i saw on my first run through of the property but I would obviously have it properly inspected beforehand to make sure.
Also is there anything I am missing and should have asked the seller for? I am kind of stuck at the moment with how huge of a move this could be for my career however I don't want to get caught up in what could be and miss something. Any advice or tips from anyone would be greatly appreciated!

A couple of expenses that I don't see listed are on-site management and the potential need of an on-site maintenance person. The management cost is a salary + and apartment. The maintenance is a free apartment.

You need to find out what cap. rate apartments sell for. This looks like an OK buy.

Just my two cents worth.

Good Luck.

Bill

You'd better find a partner if you want to pull that one off unless you have a LOT of capital saved up somewhere. . . Also, where did you find the 5.5% figure? That looks like a residential number.

You might want to check a calculator to find a ballpark for how much of a loan you can get because 3M is WAY WAY outside what most lenders will think about (in your situation) and they aren't going to line up to give you money if you have no background in doing what you want to do. Unless there is something significant I am missing I think you should do some more reading and research so you can find a project that will be both attainable and profitable for you.

@Christopher Meaker  I would imagine that in your area there are much easier and straight forward deals to cut your teeth on.

Perhaps start with a couple 2-4 residential income units and move up from there?

Congrats on your ambition and tenacity! Here's a few issues to consider:

Play big lose big. Like everything else in life, there is a learning curve here. If your not prepared you can get stung. There's more to it than mere numbers on a page.

I don't know your family background, but unless a direct family member raised you in the real estate business, no lender will take you seriously without any prior experience. This is why most start with single family residences. You can buy a home as your residence, After a year move to your new residence and rent the old, etc... Financing is easiest on personal residence.

Lenders are typically requiring 30% down for commercial property. They will also want to see 6 months reserves for all expenses in the bank. They often require professional management if you have little or no experience and will always factor it into their underwriting -in case they get the property back.

However, you can put a group together of experienced investors and partner with them. Their experience becomes yours. You don't get the whole deal to yourself, but you get a share, plus some excellent experience and mentoring that goes great on your resume. This is how I began, our partnership included two of us with great credit and no cash, and a realtor with cash and lousy credit! Eventually he went bankrupt and we bought him out and continued to expand.

Good luck! It is a fun game!

Chris, that is a big project- Commercial properties like that can be expensive in what they want you to have in reserves, net worth, costs associated w/ closing.  Make sure you are aware of all these things prior to proceeding.  I would do a few smaller residential deals if you havent purchased previously.

Thanks! i figured this was going to be the general response. Im still not swayed though I really do believe I can handle this and from what you guys say it sort of confirms it!. As far as management I have a great one who's not to bad on expenses not to mention he knows I'm starting out and he'd be willing to give me tips and stuff if I managed it myself. I am lucky enough to have family/ family friends with large complexes and who are very experienced in the real estate world as well however I have yet to approach them about this as we aren't exactly close just close enough for them to take me seriously with the right opportunity. I am working out the details of partnering with the owner of most of dominos franchises in my area as he has plenty of money if he will act as the money arm I believe with the experience around me and a site like this at my finger tips I will have a good shot at successfully managing the complex otherwise i'll take some from the bottom line and have it properly managed. Thanks again for the replies its been helpful.

wow!!!!! I am new around here and just one month into learning about real estate and it's cool to see posts like this one. Good luck

I am not posting this to be malicious in any way, but if I was your money guy I wouldn't want you sharing that on the internet. I also wouldn't want you to post the address of the deal we were working on.

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