All Forum Posts by: Marc Dela Cruz

This deal consists of a 6-unit apartment complex with tenant parking lot plus a generous lot zoned for a multifamily building. All 6 units are 2-bedroom/1-bathroom each.

The property is located in Oakland, CA and has been poorly managed and severely under-capitalized over the years, which offers tremendous potential to purchase substantially below-market, renovate, and reposition the property in a thriving marketplace.

The property will be purchased for $1,250,000 (minus $120,000 credit) equals net price at $1,130,000 or $188,000 per unit, which is an under-market value-buy in the Bay Area.

Based on comparable apartment sales, the "as-is" value of the property is conservatively between $1.2MIL and $1.4MIL upon acquisition. And once rehabbed and re-positioned, the conservative value would be between $1,800,000 to $2,000,000.

After completing the improvements and raising the rents to market rates in 18 months after acquisition, the net operating income is projected to increase over $60,000, which corresponds to $1,200,000 in added value, applying the market capitalization rate of 5%.

Anticipated exit profit is $800,000 (including annual cash flow) at sale after commissions and closing costs.

I have equitable interest in this property and I am selling my contract.

Qualified buyers must sign a Non Circumvent Non Disclosure (NCND) agreement before seeing any property information.

Please feel free to call or message me with any questions or to request more information.

Marc Dela Cruz
Email: [email protected]
Mobile: (510) 566-1418

@Taylor L.

Thanks Taylor, all good points. 

As for market rents, I went to RentoMeter website and inputted the city and bedrooms. Is this a good resource?  What other places can I look for market rents?

It's in the East Bay. Vacancy is low here in the Bay, so I'll probably use 3-5%? 

Also, property management, so maybe 10%? 

I guess I need to adjust my numbers...

@Account Closed

It's located in the East Bay. 

As for the exit value, the proforma NOI is $135,195 / 5% CAP = $2,703,900 (Yes or No?)

Expenses according to the seller:

Taxes: $13k

Insurance: $2.8k 

Water/Sewer: $4.3k

Trash: $2.9k

Total Expenses: ~$15,800 (27%)

Should I apply 30-35% operating expenses?

I am just starting out and want to provide value to other investors, so I am looking to possibly wholesale the deal.

I have a deal. It's my very first deal, so I don't want to screw it up. I appreciate any tips and advises.

6-unit each 2bdr 1 bth - Asking Price: $1,200,000 ($200k per unit)

ACTUAL

Income: $84,000 ($1,166 per unit; below market)

Expenses:  $23,205 (27.63% EGI, $3,867 per unit)

NOI: $60,795

Debt Service: $48,123 (30% down, 30yr am., 4% int.)

Cash Flow: $12,671

Cash on Cash: 3.52%

Debt Coverage Ratio: 1.26

Gross Rent Multiplier: 14.29

Occupancy Break Even Point: 84.91%

PROFORMA

Income: $158,400 (market rents)

Expenses:  $23,205 (27.63% EGI, $3,867 per unit)

NOI: $135,195

Debt Service: $48,123 (30% down, 30yr am., 4% int.)

Cash Flow: $87,071

Cash on Cash: 24.19%

Debt Coverage Ratio: 2.81

Gross Rent Multiplier: 7.58

Occupancy Break Even Point: 45.03%

Exit Strategy

PROFORMA VALUE: $2,703,900 (NOI/5 CAP)

Cash-out Refinance: $2,027,925 (75% LTV)

Loan Principal Balance: $840,000

Initial Investment: $360,000 (down payment)

Net Profit: $827,925

Jeff, 

Seller states: 

"We do not have an expense sheet because we just finished the remodel but the expenses would be very low compared to an old property since everything is brand new - including electrical, plumbing, roof, etc."

I'll keep in mind the 1.5 mil offer.

Thanks guys for the heads up, I won't be that sucker!

Minh, 

The seller bought it off-market in Dec 2014 for $1.6 million. And he claims they're cash flow positive. 

They're primary focused in the South Bay, so let's assume this property is out of their core market.

He claims, once stabilized, the property is a solid 6 cap. 

His absolutely least price is "$6,000,000 - it is practically brand new." - Seller

I will definitely asked those two questions tomorrow when I view the property. Thank you! 

Wish me luck!

Hello BP, I sent out some direct mail last week and got a call from a potential seller. I'm visiting the 18-unit property tomorrow and meeting with the seller. He bought the property in 2014, 100% vacant and with a lot of deferred maintenance. Now, all the units are completely rehabbed and are in excellent condition. The unit mix are two 2bed-1bth and 16 1bd-1bth. Here's the thing: since the owner rehabbed the entire property, 11 units are vacant and only 39% occupied. Current Income is $183k, proforma with all the units occupied and at market rent is $420k. Also, according to the seller, since it's practically brand new, he has no operating expense info to send me, only the recent rent roll and claims the building will be full soon. The seller asking price is $333K per unit. Which is about 6 million dollars. I sent him proof of funds but it's only 12-14% of the down payment needed for a 6 mil loan. Owner is open to creative financing, and there's a current mortgage and no other liens on the property. Seller motivation is to get closer to its core investing area. So here's my question... what questions should I ask tomorrow? What should I look for? Is this a good deal? This is in the Bay Area with 4, 5, 6 cap rates.

Originally posted by @Sarah Ziehr:

@Marc Dela Cruz

I think your challenge will be obtaining a loan that will cover those expenses. What will you be approved for? If its just $200k will that cover the expenses to recover from a fire? 

My experience with the 203k loan was my buyer was only approved up to 1 amount, and he only wanted to spend another... none of the properties we have looked at so far will work for him because they require too much work. 

 So, Sarah, in your experience, it's better to apply first for the 203k loan to see what's the max amount I can get before choosing a particular distressed property?

Are most FHA 203k lenders shying away from massive rehab projects? I was "guesstimating" the cost of the repairs and it might definitely go over $200k+ (EDIT: The burned down property is listed at $250k), plus I need to take into account a 10-20% contingency reserve requirement for a Standard 203k loan.

Did you and your client ever hire a 203k consultant specialist to provide the lender a Feasibility Analysis/and or home inspection to get the loan? Or it wasn't needed because it might be only a Streamline/Limited 203k?

I got a list of local FHA 203k lenders in my area that I'm planning to call up. Do you recommend getting in touch with an experience FHA real estate agent beforehand? Are all agents knowledgeable of the FHA 203k loan process (lots of paperwork)? Do they even advertise that?

What should my first course of action?

I appreciate any answers!

Thanks, 

Marc

Let us know how it goes! ;)

Try listening to Get Rich Education with Keith Weinhold and Cashflow Diary with J. Massey. Cheers, Marc