We are looking to purchase our first multifamily property. I used the MFC Analyzer to get most of the numbers. It is located very close to a private university and it stays rented through out the year as the University has a pretty big R&D so there are a lot of long term graduate students that need quality housing. Here are the specs:
4 BR in Suites-550 per month
I can put 30% down and finance it for under 10 years or buy it all cash. I have the reserves. I am not really sure which would be the better move there. I have not inspected it yet but based on the pics the property looks to be in decent shape. This one is through an agency I haven't dealt with before.
The CAP rate and NOI's look fantastic, maybe to fantastic! I really want to hit a home run with this one and could use some season investors advice. If this one is legit there are several other properties within this area that I could get at for a steal. One of the things I really liked about it was its location to other commercial space. Several of the other homes in the area have been turned into things like doctors offices, accounting offices etc. I am not sure how it is zoned and I am really not sure where to look to see if it could be zoned only commercial.
I will assume @Christopher Adkins, that you did not share the entire financial picture here. Do you have all of the expenses on the property that brings you to a fantastic NOI? Are there any common utility charges, maintenance, vacancy factor (you will have a vacancy), management fee, capex reserves, landscaping, anything else?
Don't rely completely on what the Seller provides for income and expenses either. You need to pick them apart. If you get serious, ask for his Schedule E from 2014 tax return.
Do you know the approximate age of mechanicals, roof, appliances included? Lots of questions and things to think about before you claim a homerun.
You can check at city hall or if your city has a decent website you may be able to download and view a zoning map of the city online as well as the local zoning regulations.
Best of luck.
That's awesome advice. Thanks Rob, I needed the next step and you gave me several. If anyone else has sound advice, I could sure use it.
Looks good on paper. Just remember will be more management intensive if students, etc.
I always go to the county assessor's website. It should list what type of zoning the property has. They also usually tell you the exact taxes (for the year prior) and the last sale information.
Regarding buying all cash or 30% down, the standard answer applies: it depends. If you have plenty of credit/loan ability, leverage is a good thing. Since you mention additional properties in the area, do you want to use a large amount of reserves to buy that property? My head says use the 30% for it, then do the same for the additional properties if they are that good.
Best of luck!
Bryan O., Note Capital | http://www.notecapital.us
Thanks guys that was some great advice. Once I have more information from the seller I will submit it.
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