All Forum Posts by: Jian G.

I am waying in very late in the game here . Anything at this point in the cycle of real estate you need to project longer term. You mentioned the area is c class. What general direction is it headed in? The Reno’s that need to be done will that tide you over for how many years of a hold. Also if the market for some reason brings in some sort of rent control or added tax will the numbers still work? Just some factors to consider . Hope this helps .

@Jian G. . $240k per unit ... is some scary numbers, to be honest. Someone recently quoted me $150k/unit in a 20 unit Class A building in Raleigh, NC (rent were $1200/month) and I ran away. But I'm sure these are normal ... for the SD market. I know I live and invest in other markets. But I wouldn't touch anything like this, unless I was guaranteed that rents would be north of $2k per month with zero vacancy. 

Anyway ... congrats on finding the deal in your market. 

Did you get the most recent rent roll from the seller? That should be the basis of your calculations. But, being a resident of California, there are lots of external factors you need to add to your overall analysis. 

Are you buying for value-add or cashflow? 

Have you done an analysis to understand the current management inefficiencies? What's your marketing strategy to keep vacancies at the lowest level possible? What's you strategy to bring in the best tenants and get ride of problem tenants? What's the typical profile of your tenant base? Have you identified areas where you can grow income and reduce expenses? 

Owning a 12 units is like owning a real business. Meaning, you need to think of all aspects of the business. Especially, these low cap rates don't  give you any margin for errors, if you don't want to lose your money.

Also, what's your exit strategy? 

Good Luck.

@Jian Guan, the cap rate of 5.7% for multi-family in San Diego sounds too good to be true. Coastal multi-family I believe trades between a 2-4% cap.

Where in S.D. is the property? I am guessing East County, based on the low rents (coastal rents are north of $2K/mo) and the higher cap, unless the seller just has no idea on the value of what they have.

As others have said, likely the NOI presented to you is inaccurate and the pro-forma isn't worth much. You have to construct your own model.

I am currently in escrow on 6 units in San Diego. I have been looking at deals for the last year and have not found any commercial multi family properties that I could secure financing with 25% down. We had to put 40% down on our deal. One thing to keep in mind is the underwriter will use the current rents to judge the properties performance and your DCR will have to be above 1.15 and preferably 1.20. The DCR is the reason for such large down payments in the SD market.

@Jian G.

If you ran the numbers you should be good with what ever you decide to do. So if the numbers don't work and you choose not to do the deal the you're good. If the numbers work and you do the deal then good.

All the best...

Awesome, congrats on finding a deal i know you said you have been looking for a while.

Fair numbers for your market assuming you can hit your premiums. Be careful you are not undershooting your line items for your expenses

How did you find this again, broker pocket listing?

What are the renovation costs and what would be the new reassessed property  taxes?

20% down?

Have you shopped around for commercial loans?  

is it rent controlled?

Hello, what other expenses are you accounting for? Assuming you are paying the asking price and the NOI is correct It sounds like you would be getting this for a 5.7% cap rate. I am not sure about the San Diego market so it is tough to say whether this is a good deal comparatively. The market NOI is not terrible and there would be an opportunity to refinance it after a couple years with improved maintenance. I would suggest (if you haven't already) looking up the millage rates for your county and comparing that with the purchase price so you are sure about what your expenses will be as the taxes will likely increase. Also, it would be a good idea to check the vendor prices in your area for things such as pest control, lawn maintenance, etc. See if there are other ways to add value by decreasing expenses with more efficient appliances, light bulbs, etc.