Deal Analysis for multi unit

[Alex Lee]

So I'm looking at a deal and these are the circumstances:

Undeveloped land (looks like only foundation was done), but has approved plans.

Looks like 2 multi family plots were mapped out.

comes with 35yr tax abatement and is sitting in an opportunity zone.

Assumptions with the deal:

Asking Sale price: $3,200,000

Construction costs: $7,867,125

ARV: $8,653,837.50

Est rent for each of the 2 buildings: $28,889 (for both it would be 57,778)

it looks like the investor group is looking in terms of a 20% ROI and I'm assuming they are looking just for flips, but I can't help but feel like this can be a much better investment if they would just hold onto it.

How would you guys analyze a property like this?

[Jason Matthews]

Hey Alex!

This is a great topic, regarding analyzing the deal some key questions to ask is:

- what is the best and highest use of the land (If rental properties are what's best for that specific location based on the rental return, job market and demand for apartments in that area then so be it)

- Regarding commute, how far is the location from shopping centers and essential services such as Hospitals, Fire Department, Police Stations, Banks etc. 

- Would you have to install a sewage system or is there a preexisting system (If there isn't, is that factored into the cost for constrction?)

- What is the cost for labor for the construction in that general region realistically for a project of that size?

- What is the cost for material realistically for a project this size? 

- Are construction costs projected similar to the real costs of those separate items combined?

 - How long is the project expected to last?

- Most importantly if the project is being financed, what interest rate will be associated with the financing of the project?

- After all of these variables are factored in, find out if the Cap Rate of the subject building with the rental income provided is close to the local market performance or way below.