Off market deal questions

2 Replies

Hi All,

I got a lead from a motivated seller thinking about selling one of her one of her properties since she's moving. She does no want to publicly list this property so I'll having to sign paperwork to keep this hidden. I'll be meeting with her agent soon to discuss the property details. The details current know is that a bar is being rented on the bottom and apartments rent on top. What questions should I be asking, and what numbers should I stick to like CAP rate, Roi %, etc.

Sellers can spin numbers, so you want to ask for numbers and then see if they align with what your goals are. Are you looking for a certain CAP rate? A certain amount of income per door? Know your metrics/goals first. Then you want to find out all the expenses associated with the property, like taxes, who pays what utilities, what the current vacancy rate is etc. You will also want to do research on the rental rates in the area and ask yourself if you think you can get more than what is currently being received, or if you are capped out on increasing the income through rental increases. You will also need to take into account any differed maintenance, as well as ongoing maintenance. For example if I were looking at a property, I know I want to make $100 per door minimum in net income after all expenses including insurance, taxes, capex, maintenance, utilities, vacancy etc. I plug in $750 per door for cap ex, and depending on the size of the building, put in another number to cover maintenance. I use 10% vacancy initially to see if the deal will be fat or thin, then move towards a 5% vacancy calculation since I believe that is more likely than a 10% vacancy rate. You can find out taxes easily, and call your insurance company to get a quote on insurance so you can plug that in as a real number vs a guess. If the systems like the roof, furnaces are new, I may make a different offer on the property than if they all needed to be replaced. While there is a lot of science to purchasing a property, there is an art to it as well. Start with your goals in mind and work in reverse from there. Hope some of this helps!

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