1031 Exchange Opportunity in DFW Market

Property metrics have continued to improve since we talked. We will probably be listing the property at $1,940,000 ($32,881/door).

2010 Budgeted rents are $417,000 and total top line is $432,280  = 4.51 GRM

Total Expenses budgeted at $274,131 ($4646/door).

Budgeted NOI of $158,149

That’s an 8.11 Cap Rate BUT a local buyer can get rid of third party property manager and save another $15,130 (3.5% of topline).

That change gives a Pro-Forma NOI of $173,279 yielding a 8.88 Cap on an improved, stabilized property.

Another $50,000 invested in a new 50 ton chiller for the big side of the property would get rid of window units and should save $15K/year in electricity and replacement. 3.33 year payback and boosts NOI to $188,000.

Currently have 55 units occupied (93.2%), while budget assumes 91% occupancy. We just bumped 2 bedroom rents to $725 this week (all bills paid) as we have few left, and will probably bump 1 bedrooms later this Spring to $615. That’s not in the budgeted number assumptions and will add about $6000/year to the top line starting this Summer. We’ve been running a $199 move in special, but will look to change the concession to a smaller number and let the property sell itself. Safe to assume new concession of $250 off first month rent, or something to that effect. Again, not in the budget. We assume 3 turns/month starting in March.

We’ve sunk over $225K into the property to date, and have a few more small capex items to get done. Maybe another $5-7K all in. Clearly this is going to be a solid deal for the right income investor, as we are leaving some upside in the deal. Financing is going to be the tricky part, as we don’t have 2 full years to document, your buyer(s) sound like first timers, and it’s a class C product.