125 SFH Portfolio Acquisition

[Winston Parks]

BPers,

I have read several posts here and intend on re-listening to a podcast or so that touched on this topic; HOWEVER, there are some lingering questions. My background is in commercial, so.....

Why can I not treat this like a B/C class MHP or Multifamily? NOI/CAP = Purchase Price? Ive spend some time underwriting this and it hit me that I was "trying to hard". Any of you experts know why I could not treat it like this?

Deal:

125 SFHs

95 rented, 30 vacant

Avg rent: $661, Gross: $747,912

Vacancy: 12% (Total Guess)

Taxes & Insurance: 15.8% (I have actuals)

Repairs & Maintenance: 12%

Lawncare for Vacants: 1%

Management: 9.2%

Operating Expenses: 50% (coincidence) ; ($373,956)

CAP X: 6% or ($45K) (I believe this to be too low)

Estimated NOI: 328,956

8 cap

Purchase Price: $4,111,950.00

Obviously there are a few areas that need confirmation, but I feel like treating this similar to a CRE deal is justified. No?

Thanks in advance.

[Taylor L.]

This would be financed like a commercial deal, so I don't see why you couldn't look at it that way. I would think you'd be able to improve on the management and vacancy figures when it comes down to operating it. Taxes & insurance would warrant looking into. The properties could very well be underinsured. 

What is the value of the portfolio if it were sold as individual multifamilies? At your valuation you're buying at just under $33k a door, which is very cheap in the grand scheme of things. That said, $661/mo for a single family is pretty cheap too. So it sounds like this is a lower cost of living and lower income area.

All that said I'm a commercial multifamily guy so what the heck do I know?

Have you talked with a lender about this deal?