Renovated Apartment Building with 28 Units (Radcliff KY)

[Jason James]

Renovated Apartment Building with 28 Units (Radcliff KY)

I just ran across this doing my daily Craigslist searches. I don't work in this area or know anything about the area. Just thought I would pass the info along. 

[Bryan Gay]

Anytime a building of this size comes on the market it generally peeks my interest. We have a small investment firm in Southeast Kentucky, and we are looking to possibly move into your region. I have a few initial questions If you have a moment to clarify for me:

Why is the building currently vacant?

The property was purchased in September 2013 as a distressed foreclosure property. I have invested a substantial amount of money in renovating it to it’s current level but it needs additional funding to complete the building to achieve 100% occupancy. Filling the property with tenants was not a priority for me in the past. I started advertising for tenants only 2 weeks ago and I have had a tremendous amount of interest (which can be proven with emails and phone log) as the property has high visibility from the road. I will be receiving my first completed application forms tomorrow.

I see in the listing that you have renovated a few units, will all 28 need to be renovated in order to meet your revenue projections?

In short, YES. As of today, I have 2 fully renovated deluxe apartments completed (cost $5,000), 1 standard apartment renovated/completed (cost $1,500) and 1 x 3 bedroom apartment that is 90% completed which I live in. Three are ready to be rented today. It would cost very little to complete an additional 6 units.

Would we be able to see the Rent rolls and a profit and loss statement for the past 2-3 years?

At the time of purchase I was given a rent roll for one month which I learned after closing it was totally fabricated. I have no other information about past performance.

Are there any deferred capital expenses, such as a new roof or HVAC looming on the horizon?

Each apartment has a gas furnace which was fully serviced after purchase. In one building 12 units work fine, 1 unit needs a couple of hundred dollars to repair and one is toast. In the other building only some of the furnaces work but I can’t remember the exact number (maybe 6?) as I had it written down and now can’t find the paperwork. I can tell you, you are looking at $2,000 per unit to replace although I have a contact that can sell them to me at wholesale for $1,000 per unit. You would not need to worry about replacing the furnaces until you have tenants moving in over winter. And, if you didn’t have the money you could buy them a couple of heaters to get through the first winter.

The metal roof appears newer and in good shape.

No HVAC.

Water heaters are in good shape.

The building is structurally sound.

No termites at time of purchase.

The carpet was in such bad shape I only saved 6 units and the Carpet Cleaner assures me the carpet will come back to life. Four basement units need ceramic tile; not carpet.

New carpet with under pad in bedroom and spare room/closet costs $250.00 in materials.

When the previous owner realized he was going to lose the building he decided to remove every single stove, fridge, laundry machines and vending machine.

Currently I have 9 brand new sets of stainless steel appliances that are conveying with the property (only set used has been in my apartment).

9 units have been fully demo’d, prepped and cleaned ready for a deluxe renovation.

I have worked closely with the Building Inspector and he’s totally cool to deal with. No building permits are required to complete the renovation as there is nothing structural.

I saw a previous ad on CL for this building that estimated $120,000 in annual revenue. But this listing is showing $150,000. That is a pretty big swing, any reason for the change?

Here is how I came up with the numbers –

Income

12 units x $400.00pm = $4,800.00 = $57,600

12 units x $500.00pm - $6,000.00 = $72,000

1 unit x $350.00pm $350.00 = $ 4,200

3 bdrm x $850.00pm- $ 2,550.00 = $30,600

Total Projected Gross Income $164,400

Expenses

Trash @ $50.00pm $ 600 (eventually $100pm for a big dumpster)

Real Estate Taxes 2014 $ 2,581 (in 2013 the property was assessed at $550,000. I worked with the Tax Assessor who agreed to halve the taxes for 2014 – huge savings)

Insurance $800pm $ 9,200

Total Expenses $12,381

Estimate $164,400 - $12,381 = $152,000py

Growth is coming to Radcliff with a $40 million dollar VA Hospital being built as I write this within a couple of miles of the property. This will bring 180 to 200 new, full time, stable jobs to the immediate area thereby increasing the population by 1 to 2%.

If you don’t mind doing a little renovation work now to this property you will end up with a total cash cow for many years to come. If you only want to hold onto it long enough to have it at 100% occupancy there is a tremendous flipping opportunity. Based on my research Ibelieve you could sell it for around $1.2 million.