HELP!? - Unique Multifamily Deal Analysis - Risk vs. Reward

3 Replies

Hey BP Community,

We have a deal - or something unique we are tying to figure out if it's a deal or not!

A property has been listed at 607 Highland St in Cramerton, NC 28032.  The property is spread across one acre and includes a 2/1 home in good shape, 2x cottages in good shape and 4x cottages in need of complete gut rehabs.  I have talked to the county and it is non-conforming but legal from a zoning standpoint so no govt roadblocks.

What's tripping us up is the business case.  We have never done a rehab and we would be managing the rehab of these four cottages from abroad.  It's tough to estimate how much it will cost to get them in rentable shape so we have run some scenarios.

Based on a full cash equity analysis I think the base case, most probable ROI for this project is 5.2-6.5%. Rents should meet the 1% rule and expenses should be low after the four cottages are rehabbed.

Please have a look at the ROI scenario analysis and let me know if you think this is a deal to proceed with. It's frought with risk and doesn't have a huge risk-adjusted upside so we are wondering if we should even pull the trigger on this one.

Rehab ROI Scenario Analysis

Zillow Data for 607 Highland St Cramerton 28032

Updated 9 months ago

If it's not clear, my real question is, looking at this deal, would you do it yourself? What do you think about the risk/reward balance in undertaking this massive project?

Seems like a lot of work and risk for something that should hit 1%... You can go buy a SFH and hit 1% tons of places with a lot less work/risk.

No, risk verses reward does not equate especially trying to do it from away.

Any other thoughts or insights?

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