Would You Take This Deal

[James Hiddle]

I came across this a few days ago. It's a 90 unit apartment complex. The owner is in pre foreclosure due to a high vacancy rate(50% plus 5% concessions). If he doesn't get rid of this than he will be foreclosed on and the current lender is not accepting any short sales at all.

Here are some numbers:

Asking Price-$1,323,000
GOI-$653,760
Annual Expenses-$313,953

What would you do with this deal? Toss it in the trash or come up with a plan to increase the occupancy? By the way the owner is an out of state owner.

[Peter Giardini]

From the actual numbers the gross income could be as high as $1M annually. If that correct?

I do see a deal here... would need all of the numbers... but here are some thoughts.

From your perspective why is the property so under managed? Is it lack of management attention, the economy, the overall condition of the property? In short, even if you purchased it at the above price, could you improve the performance to make this a worthwhile deal.

Bottom line... is this property in a location where the economy will support you approach?

If so... and assuming you have some experience in turning a building around, you could see if the owner would option the building to you for a small, non-refundable fee, giving you enough time to "upside" manage it and then purchase it from him outright.

Of course you would have to ensure that you got all of the benefit of the upside and he only got the original asking price.

Let's have some more info... and city would be helpful.

Good luck!