First Apartment Complex Acquisition - What would you offer?

Question

Hi all, I am working on a deal and wanted to get some thoughts.

Here is a summary of the property:

- Located in central CT (in Bristol, CT)

- B-/C area (blue collar, but nice area)

- 20 unit building

- Asking $985K

- Building is brick built in 1928

- Gas heat (paid by tenant) / All other utilities paid by owner

- Rents are under market given as-is conditions

Below is a snap shot of the pro-forma given a rent increase to market

Any constructive feedback would be greatly appreciated as I start down my BP journey!

Charles Wiegert · Answer

I'll let the more professionals look at the number, but being familiar with the area, i would explore the rents at a deep level and make sure youre very comfortable with being able to practically acheive them. Walk each unit and talk to the tenants if you can.

I know the place youre talking about and there are also multiple MF properties for sale on the road at favorable or decent prices. There may be a good reason for that.

There is also the speculative play that Bristol will finally do something with the mall site which could increase (or decrease) value.

Wade Sikkink · Answer

We bought a 14 unit 3 years ago.  Based on that, here's some feedback on your deal.  I can't comment on the price or rents because I don't know your market.

Your laundry will probably make more than you are budgeting.  Ours makes about $2500 gross per year and you have more units than we do.  On a 20 unit I think you could safely assume $3000 per year.

Your repairs are probably too low.  Our building was built in 1973 and had been neglected.  We have been averaging around $1200-1500 per month in repairs/renovations for the last three years.  I expect that to slow down now that we've pretty well renovated all but a couple of the units.  And keep in mind that expense doesn't come nice and smooth every month.  We'll have a few months with next to no repairs, then someone will move out and we'll drop $5k renovating that unit.

We also executed a pretty significant rent increase shortly after buying the place.  Even with that increase we were at the low end of the market, so we didn't really lose any tenants because of that.  You should be able to push rents up as long as you stay at the low end of market and not lose any tenants.

Good luck!