I’m interested in partnering with someone to buy real estate.

[Alan Scott Hobbs]

I’m fairly new to real estate investing but the house I live in is paid for and I have a rental property that is paying for itself and paying me too.  I’m interested in partnering with someone near Augusta, GA to buy small multi family homes to rent.

[Mitch Messer]

Hey @Alan Scott Hobbs, Augusta is one of our target markets!

What kind of partner are you looking for?

If you've got the deal expertise, a money partner would bring the funds for you to close deals.

If you've got your own money, an experienced operator would help you source and underwrite deals.

[Alan Scott Hobbs]

I own my own home and have one rental property paying for itself and paying me but other than that I don’t have a lot of expertise.  I’m steadily learning more and more as I go along.  I don’t have access to a lot of money but I’m interested in acquiring small multi family properties.  
There is a 24 unit newly renovated property for sale that the owners paid 1.3 million for before they renovated it and now they’re asking 2.99 million.  They’ve come down $400,000 but they’ll definitely have to come down more before anyone will probably get interested.  The single bedroom apartments must be about 1488 square feet from my calculations because 35,719 square feet divided by 24 is 1488 which is quite large for a single bedroom apartment..  The apartments are about one mile from Augusta’s medical district which could make the apartments attractive to nurses working at the hospitals.  There is no way I could afford anything like that but I wish I could get a small percentage of ownership if I help broker a deal and see that the place is managed properly. The listing agency is saying it would be about $20,000.00 per month to borrow that much but considering you should be able to get a bare minimum of $1,250.00 each unit per month, and probably more, there is some cash flow that could be made.  Let me know what you think.

[Mitch Messer]

Quote from @Alan Scott Hobbs:

I own my own home and have one rental property paying for itself and paying me but other than that I don’t have a lot of expertise.  I’m steadily learning more and more as I go along.  I don’t have access to a lot of money but I’m interested in acquiring small multi family properties.  
There is a 24 unit newly renovated property for sale that the owners paid 1.3 million for before they renovated it and now they’re asking 2.99 million.  They’ve come down $400,000 but they’ll definitely have to come down more before anyone will probably get interested.  The single bedroom apartments must be about 1488 square feet from my calculations because 35,719 square feet divided by 24 is 1488 which is quite large for a single bedroom apartment..  The apartments are about one mile from Augusta’s medical district which could make the apartments attractive to nurses working at the hospitals.  There is no way I could afford anything like that but I wish I could get a small percentage of ownership if I help broker a deal and see that the place is managed properly. The listing agency is saying it would be about $20,000.00 per month to borrow that much but considering you should be able to get a bare minimum of $1,250.00 each unit per month, and probably more, there is some cash flow that could be made.  Let me know what you think.

Hey @Alan Scott Hobbs, thanks for responding with some data to crunch!

At $1250/unit/mo and 24 units, we're looking at gross income of $360K. For simplicity sake, let's assume a 40% expense ratio, giving a net operating income (NOI) of $216K.

If we were to buy at their asking price of $2.99 million, we'd be looking at a cash-on-cash return of 7.2%, and that's without factoring in capital expenditures or debt service.

I'd say this one has a looong way to fall before it's a deal!

[Alan Scott Hobbs]

How much would the owner have to come down for the deal to be profitable?

[Mitch Messer]

Quote from @Alan Scott Hobbs:

How much would the owner have to come down for the deal to be profitable?

That's the million-dollar question!

It's impossible to know without a deep-dive into the condition of the property, the projected renovations, and finance options.

But you should still try to answer the question! 

You can (and should!) start building a basic underwriting spreadsheet so you can play with the various deal inputs, test out different scenarios, and see how they perform financially.

Analyzing deals is the only way one really learns to think like an investor!