Hope everyone enjoyed their weekend.
I am looking at a commercial apartment complex. I've ran the numbers multiple times and continue to see this property as a great investment. I am looking for two things from the community.
1. What additional information would be needed for someone to invest?
2. Does anyone know an investor who would?
Here is some information about the property.
Down 20% ($1 MM)
Interest ~6% (which I inflated)
30 yr fixed
8-year property tax exemption (already approved)
3,390 sf of retail space
150 underground parking spaces
Monthly payment ~$24k
It will be a brand new 5-story 163-unit apartment complex (the builder is the seller).
My income calculations are only for rent:
ATM machine, vending machine, parking, laundry, red box, storage units, furnished apartments, pets, retail space, application fee's, & late fee's not included.
I also included utilities into my expenses, but that cost will be passed to the tenant.
Avg. market rent for an apartment: $1500, but I used $1200 for my calculations (avg. market= every apartment complex within an 8-mile radius of the location, 2bd/2bth).
$195,600 monthly income (@$1,200 rent avg. for all of the units).
$73,818 expenses using the 50% rule (the BP community go to rule)
$73,818 = monthly cash flow.
My personal projections for expenses is based on 900,000 units surveyed nationally/ for my market specifically (I can attach that report upon request for an investor), which puts our:
Monthly CF = $101,463
NOI = $1,505,352
Cash on cash = 115.96%
Cap rate = 30.11%
2% rule = 19.56% ($1200 x 163/ $1MM)
I used a 5% vacancy rate (national average is 3.8% for vacancy), 5% contributed monthly to CapEx (even with a new construction), 5% yearly income/ expenses increase, and the yield of asking price to cash flow is just under 4%.
The market itself has a median income of $70k. Job growth is up 2.6%, unemployment down to 5%, and the population is ~1.9MM and growing at 8% (All #'s from Forbes).
I will have the property managed by Grey Star, the number one apartment management company in 2014. The property manager of my previous apartment (I am now a homeowner), really likes my idea and his complex (240-units) was voted number one in Albuquerque last year. He and myself enjoy working together because of love for attention to detail. One might say we're OCD. He is my mentor for the duration of this process.
Background on myself:
Double majored for undergrad: accounting and business management (3 classes away from a triple major with Marketing, but I already had a job offer). I also ran track and played football. I was a national champion in the triple jump, a 4 year starter for the football team/ 3 captain and we won 2 conference titles and played in one bowl game. I enjoy the process of becoming great and leading other to become great.
I interned with SuperValu and upon graduation, began working as an assistant manager in the accelerated retail leadership program. 8-months on the job and I was promoted to store manager before resigning a year later. Great experience! But low ceiling for what I want to achieve in life. Finished my MBA within that 2 years by taking night classes.
Came on board with Altria, previously known as Phillip Morris, two years ago on March 1st and I am on my second year of my PHD program. I am a territory sales and marketing manager and I control a quarter of the states sales. What we did for an entire grocery store in sales, I do with one brand of cigarettes. I manage 4 different operating companies and have seen growth in share and volume in all but one.
If there is anything else you would like to know about me or the complex, please reach out. I am also open to performance gaps you feel I have and look forward to meeting someone who would like to invest.
Thank you all,
other than not factoring any lease up costs why is the cap rate so high?
If you are putting 20% Down...why do you need an Investor on a Construction Project?
Even if your credit is pure poopy, commercial financing of some kind should be available with little to no hassles using 20% ($1m) down provided your LTC does not exceed 85-90% which I'm sure some pre-construction commitments/sales can overcome even if it is.
Take your Feasibility Study, Market Analysis, City Approved Plans, Business Plan, Pro-Forma/Projections, Land Use Approval, Environmental Approval, Corp of Engineer Approval (as needed), Soil Sample Reports, Executive Summary, Builder Portfolio and either an Architect Rendering or Scale Model and march on down to the local bank. Pitch them on the Pre-CO Sales Plan, let them be the Master Lender for all of the pre-sales and form a partnership per-say.
So am I missing something here?...Why are you pitching here?/
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