Totally new at this commercial thing, but knows a good deal when she sees one!

[Myka M.]

I have found an apartment complex for sale for about 2 mil. I want it! I have no experience with commercial properties and bad credit. The place needs tlc but already has 55% occupancy. Something like 45 1 br's and the rest (55) 2 br's. Located in a good rental area. Can someone give any advice on a strategy to acquire this potential almost half a million dollar a year investment?

Any wings that I could fly under? Any coat tails I could swing from?

P.S. I hope this is the right place to post this... I just got out of the negative. :oops:

[Will Barnard]

Pre-judging from your posted unit numbers and rental rates, this building is in a very bad area. One deds under $400 represent a low D class property. The other problem I see is that it is in Dayton. This city has one of the higher vacancy rates in the country, the population is steadily increasing, the unemployment ratio is higher, etc. It would not be my choice of area to purchase a building like this. That said, you may feel different about this city and that is certainly your choice.

Here is what I see:
36 1 beds X $350 = $12,600 monthly
62 2 beds X $400 = $24,800 monthly
Gross income = $37,400
Less 45% vacancy of $16,830 = Adjusted gross income of $20,570
I couldn't see paying more than a 15 cap for a building likle this (less repairs) so my max offer based on these assumptions would be $1,371,000 less the repair costs (this you can get via a reduction in price or a repair credit from seller, or have the seller perform the repairs before closing and subject to your approval.

At 2 Million, it is a dead dog. At 1.3M, you have something to work with.
Just keep in mind that you will have negative cash flow during the stabilization period and therefore need cash reserves to cover it.
Since you can not do this alone and it is an REO property, your only option is to find a partner, or lock it up at a great price and wholesale it.

All votes for my posts are appreciated.