So the scenario. 20 unit complex. They tried selling for $1.1mil & 1mil with no sale. I want to reach out to the owner and make an offer. The old listing says she would hold the note. Plus I'm a realtor and can waive the commission.
The average rent is about $575 for the 20 units with total income $11,480. (Updated they could be going for $750.)
Onsite Laundry (not sure of income)
They are saying total exp is $46,150. So $3,846 a month and that it's a 7.8% Cap Rate
What strategy should I approach this with owner? Note? Fair loan percentage? Waive commission? What for down payment?
This place is in need of a serious facelift. No photos of the inside units.
Any input is appreciated and thank you in advance!
Asking $1.1M for a 20 unit, I would expect current rents in the $900+ range to get that 7.8% cap rate.
Their expense numbers must assume most of the labor is done by the owner. Unless you are buying a job as a handyman, leasing agent, and landscaper, I would add in a large factor for additional labor. As a SWAG, I would expect operating expenses to run at least $60-70K. I suspect it didn't sell because their numbers were bogus. Plus, you are going to need a pile of cash to update the property.
Is it worth your time pursuing a property where the seller has unrealistic expectations of its value?
I would say the easiest thing to do is contact the prior listing broker and ask them about the property and the seller. (Ignore the commission issue. It is inconsequential to the whole of the transaction.)
Join the Largest Real Estate Investing Community
Basic membership is free, forever.