All Forum Posts by: Account Closed

 @Chris Tracy - Nothing in particular.  Was just wondering if maybe there were any good resources that maybe I was missing.

@Jeff Banky - I've been doing some research on markets and Indianapolis seemed strong.   It's had strong employment growth over the past year and the unemployment rate is under 3%.  Vacancy is hovering around 5% and rent growth has been higher than 5.5% the past year.  I've haven't dug in much more than that but I think it's worth exploring.

@Jillian Sidoti - great tips!  I've read Gene's book, It's a Whole New Business.  Great resource.  

Can you recommend any resources that provide best practices for interacting with private investors?  

@Sushil Sureka based on a 20k population, you're going to be hard pressed to find a large scale apartment developer or REIT that wants to develop in an area with a population that small. You may find an apartment developer that wants to build LIHTC or some other affordable housing.

I would start by calling as many properties as you can to get rental information, vacancy rates, waiting lists, and opinions of property managers and what kind of demand there is for new development.  

Some questions...

1.  If you're planning to sell to a market rate developer, do market rents in the local area support new construction?  Will the development pencil?

2. Are you getting the land a below market price in order to flip it?

3. How is the economy?  Is the population growing and are there jobs being created?  That will be very important to a developer.

4. Do the demographics support the rents of a proposed new development?

5. How many units can be built on the site?  A larger developer likely won't develop a small property.

Let me know if you'd like to discuss?  My background is in apartment market analysis and valuation. 

I agree with @Account Closed, I think most of the details will be ironed out by the attorneys on each side of the transaction.  

@James Chambers that's good.  So you should have paying tenants through the summer.  That makes sense regarding self managing and I doubt $25 to $50 will scare off too many tenants, especially if they are way under market.  Best of luck.

@Joseph Dzwiniarski  You could calculate the total cost of HVAC, roof, appliances, water heaters, etc., figure out their typical useful life, and determine how much should be set aside each year based on the current replacement cost.  Obviously, some items break/need replaced prior to the end of their useful life.  I would also budget for increased cost of goods/services in the future.

I'm assuming you're referring to the Section 42 LIHTC program?

If this is the case, what's your plan when the income/rent restrictions stop?  Are you planning to convert to a market rate property? 

-Is the property located in a good area?  Somewhere you'd want to own a market rate deal?

-Typically these properties require a lot of capex at the end of their compliance periods.  I would budget for a decent amount of interior and exterior renovations.

-Are the rents at the maximum allowable levels?  If they are, you'll be restricted on increasing income and may even have to lower your rents if the utility allowances increase from year to year.

Just a few things to consider.

Are the leases annual or just for the length of the school year?  You might have to wait until next summer to raise rents given the in-place leases.

If you're planning on increasing rents significantly, you may want to budget for higher admin/marketing, repairs/maintenance, and staff expenses since you may experience higher than typical turnover.

It appears that some of the improvements can be made while your units are occupied.  This may lessen turnover next year as your current tenants see that you're improving the property.

@Guido Bertoli for current assessment information, you can call the local assessor. I would also ask for the millage/tax rate and how property taxes are calculated. In some areas, they taxes are based on 100% of FMV, other areas it's based a percentage of FMV. I would also ask the assessor if properties are reassessed following a sale (in many jurisdictions they are). If they are, I would not rely on the current assessment or taxes. I would bump my assessment up to 85-95% of the sale price and calculate accordingly.