Originally posted by @AJ Smith:
Originally posted by @James Hamling:
@AJ Smith in a nut-shell I think your bananas to even consider this property anywhere near the numbers your talking.
I need to preface this with the 411 that I did a LOT of deals in this area, for years.
The area, tenant class, neighborhood class, none of it supports the kind of leverage your looking to do on this thing.
Not long ago we were able to pick these up fo $50K all day long, and many passed at that time. It made sense on rents, but you needed a good team ready to manage these properties, tenants in this kind of area. Then as things went on and moved up people were players at $75k, then $100k, even $125k I can understand but $200k+ is complete insanity, total complete insanity.
Do your homework on the area, there is 0% chance I would ever consider $100k per door in the area, even $75k would be a hard sell.
There is a very long list of better places and ways to deploy $250k acquisition than on this lead balloon.
Thanks for the thorough feedback James.
I'm hearing from you that this property is very overpriced for this neighborhood, and the amount of leverage I'm proposing to have on this property would find me quickly underwater on my mortgage when the housing prices finally rebalance.
Is that what you were meaning to say by your post?
What I am saying is not all areas are equal. This area for a looong time was referred to as "The War Zone", not "A" but "The". Yes, areas can improve, still the point is this is a C class area at best, there will be tenant issues, the area could easily become a D- are again very rapidly. Your leverage point is over the top intense, what reserves do you have if the area declines, again, and rents drop 20%? If tenants tear the place apart and in that area I have had some epic stories of tenant damage, floor joists busted and walls falling down epic.
Your leveraging the deal as if it's a B+ area with strong appreciation, where nurses and firefighters are your tenants, nothing could be farther from that in this areas case. You may have tenants who get raided by DEA, it happens in this area. You may take a drive of the area to check on property and pass an armoured swat van a few blocks away, I have in the area.
Does it mean everyone and all the area is horrible, of course not, but your looking into one of the highest risk pools there is with insane amounts of leveraged funds, little to zero spread. Your doing Minnetonka/ Plymouth/ MapleGrove numbers in North Minneapolis Broadway area.
You need to get an acquisition agent or consultant because that is an epically horrible bad buy, on a scale of 1-10 of bad buys this is a 20. Yeah, that bad.
You need a person who knows the market and properties to help safeguard you from such mistakes because on this one listed I don't know how you can survive it. Again, like I said, when we were picking these up for under $50k, the banks literally gave us lists and said "please, take anything you want, shoot us any price, even $500.00, anything", even then most people were not buying them. Your near the edge of the improved area, but us local pro's know in the snap of a finger it could go right back to that, and would never get into such a leveraged deal in that area.
You gotta know the area your investing into, it matters a hell of a lot.