Tallahassee Multifamily - good or bad deal?

Question

Hi everyone,

please check out this listing...http://www.loopnet.com/xNet/MainSite/Listing/Profi...

Price:$399,900No. Units:32Building Size:14,400 SFPrice/Unit:$12,496.88

Is this a good deal?

Looks like there needs a lot of work to be done on the property. The listing says:
"Needs moderate rehab including kitchens, bathrooms, A/C's, floor covering, paint, etc. Estimated cost of rehab $8,000 - $10,000 per unit. We have a commitment for a Purchase/Rehab Loan of at least $400,000 for the Buyer!"

I live in Orlando, so I will need a PM and general contractor, but the listing says:
"We can also refer you to a great property manager and excellent tradesman who'll get the job done on time and within budget!"

Can anyone from Tallahassee please comment if this property is in a good area?

I am still pretty much new to investing in properties. Is this deal too risky for a newbie?

I will greatly appreciate your advice.

Thank you,

Gert.

Tim Hall · Answer

At first glance this sounds like an epic deal. You know 32 units for only $400k. Rent rolling around $15k a month after it's fixed up. Now here's the sticky bit, estimated cost for rehabbing is $320k, does that include the roof, common areas and parking areas. Take that concern away and you've got a D area with only 1 bed 1baths. So no families trying to make it a better place to live.  crime, drugs, alcohol and no one works so they have all the time in the world to mess up your place. Put a pm in there and let them deal with hassle, if your going to do it. I'd think long and hard before you do though.

Steve Olafson · Answer

Don't stop because of our input!!!!!!!  Look into it deeper.  It is a great opportunity to learn.

Not that you should proceed with a purchase but the information and practice is valuable to you.

Steve Olafson · Answer

Have you confirmed the cost of the fixup with contractors yet?  I do a lot of apartment repositioning.  I have a crew, processes, deals on materials, etc...  Most of the estimates put out by a listing agent are inaccurate at best.  They may count up the cost of some items like cabinets, floors, countertops and toss that out as what needs to be done.  Everything needs to be considered because everything costs money and time.

I tried to do this on a 29 unit building that was not in my city.  It was tough to find people to do the work and the costs were astronomical.  It works so much better in an area that I can get my crew and hands on the project.

GERT S. · Answer

Thanks Sebastian, I appreciate it! Good luck with your ventures is tlh!

GERT S. · Answer

Thank you very much Sebastian! Your insight and knowledge are greatly appreciated- I am going to stay far away from this deal. All the best, Gert.

Siye Baker · Answer

I looked at this property several months ago, back when it was being auctioned off by the dept of treasury( I believe). While I cannot comment on the what the units looked like, I deemed it beyond my comfort zone, due to:

1) located in an economically depressed area( class D)..one of the 4 worst areas I can think of in the city. Vacancies running amok throughout the area.

2) I believe they are all 1/1 units, so that knocks out a lot of families wanting them

3) your only hope is sec 8, but your potential tenants will probably not want to live across from a drug spot. That stretch of road in particular is not one where I would feel comfortable walking at night time(even with a ccw).

Not to say that you could not make a go at it, but it would be higher on the risk scale as it has already been under contract multiple times. With my limited experience- I would only consider it with a 100% seller finance, non-recourse. As I am sure you will find that the easiest part of the project is the rehab(which is probably understated). I would assume that all the hvac condensers and anything made of precious metals both outside as well as inside the buildings have been stolen. Success will come from financing terms, management of construction costs, marketing and management.

Those are all the reasons why it is beyond my comfort level. Others on here will chime in with all the opportunities that a property like this offers.

Sebastian

Ben Leybovich · Answer

not a chance :)

GERT S. · Answer

@Steve Olafson, I hear what you are saying, and I do agree that it is a good learning experience. But I think I now have enough information to make a reasonable decision not pursue this deal any further.

GERT S. · Answer

@Tim Hall, thanks Tim, I agree. I am going to pass on this one.

@Steve Olafson, thanks Steve, I agree- I think the estimates put out by the listing agent are probably inaccurate. After the advice I received from fellow BP members, I am not going to pursue this deal any further.

Siye Baker · Answer

I will keep my eye out for progress on that property also.

Tallahassee Multifamily - good or bad deal?

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