12 units apartment deal in Virginia

Multi-Family and Apartment Investing
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12 units apartment deal in Virginia

Olu Efunwoye
Rental Property Investor · Springdale, MD · Member since 2018 · 65 posts · 24 votes

I have a deal I am currently looking at in Chesapeake Virginia, and I would love your thoughts on this:

12 units 1bed/1bath apartment built in 1912 (renovated in 2018). 9536 SF, the asking price is $995,000 at 8.07% cap rate with a NOI of $80,106. The broker is also the property management company, and they believe there is some room for a rent increase. The owners are out of state, and they are selling to move to a bigger deal. The property has been on the market for over a year. According to the broker, the current loan is assumable (the rate is 3.35% or so), but he isn't sure how that works. The sellers may also be open to carrying a portion of the mortgage.

Questions for the BP family are: is this a good deal? The broker has sent the rent roll (in the form of a P&L showing what comes in for each unit and a breakdown of the expenses). How can I negotiate a lower asking price? What are the questions I should be asking? I plan to travel down there next weekend (about 3.5 hours away), so I am gathering all the necessary info.

If I did cashout refi on my current property, i can pull out $155k towards this but will be left with an additional 45k or so if doing 80 LTV, which is why I am leaning toward seller carry a second mortgage.

Lenders out there, now you have my deal, can you do it? Let's talk.

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Lisa DoudBusiness Member
Investor · Portsmouth, VA · Member since 2014 · 75 posts · 72 votes
2y

Olu,  you need to be careful.  83K per unit seems kind of high for the age of the building.  Also If you are talking chesapeake and a 1912 building you are talking probably about South Norfolk area, and you need to know that you are subject to rental inspections in this area.  You can look this up by going to the city's web page and https://www.cityofchesapeake.net/424/Rental-Dwelling-Inspect... under the quick links at the bottom there is property search map. To schedule an inspection you can go to https://aca-prod.accela.com/CHESAPEAKE/customization/common/... which will take you through the process.

The other thing you should be aware of is that somewhere in this property you are sure to have Knob and tube wiring.  Also anything that is build in the early 1900 usually has serious plumbing issues and foundation issues.  The important thing to find out if there were any major Electrial, Plumbing and HVAC renovations completed and the date.  Also take a look at the tax record https://parcelviewer.geodecisions.com/Chesapeake/Account/Log... see what other kind of structure are attached to the building.  

I just know that if you have to fight the Historic Preservation Commission you have to be very careful.  If you have any questions about my fight with the HPC send me a private message or you can call my office.

Hope this gives you some info to think about.

Doud Realty Services, Inc.3.8205 Reviews
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  • Jonathan GreeneBusiness Member
    Real Estate Consultant · Madison, NJ · Member since 2016 · 6k+ posts · 7k+ votes
    2y

    Have you ever owned more than a single property? From your questions, I am thinking no. So, my answer is no. I wouldn't buy a 12 unit with all 1 beds built in 1912 just because of the age, even though it was renovated in 2018. What does renovated mean? That usually means the units were renovated, but what about structural, mechanical, electrical, plumbing? All the things you can't see will come back to kill you in a 1912 12-plex if you aren't a seasoned apartment investor.

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  • Nathan M kiefer
    Rental Property Investor · south carolina and michigan · Member since 2023 · 348 posts · 226 votes
    2y

    $83k per unit for 1 beds=crazy. 

    I wouldn't buy this thing for any more than $55k/unit- all one beds is a bad deal. 

    too much missing info- historical vacancy, tax returns etc etc. 

    Literally the only positive thing I see about this deal is the assumable loan at 3.35% but i suspect its coming up on sunset?

    If the owners are pm and say "believe" there is room for rent increase, then why haven't they done it?

    0Reply
  • Greg Kasmer
    Rental Property Investor · Philadelphia, PA · Member since 2021 · 774 posts · 500 votes
    2y

    Olu - Assuming the geography and style/type of building fits your criteria (others have made comments that you should consider) the other part of this discussion on whether this is a "good deal" is the ability to increase the NOI of the property over time. It sounds like you were given a T12 for the building... Did you check the revenue and expenses provided to ensure they are realistic? In particular, I've found some T12 leave off expenses such as property management fees (on smaller buildings), turn over expenses (to re-rent to new residents), and realistic maintenance expenses per unit - just to name a few. Therefore, I would ensure that the current NOI is accurate based on YOUR assumptions, then you can think about how you can increase the NOI by increase revenues or decreasing costs over the coming years IF you were the owner. To me, if you can only increase NOI 10-15% over the next 3-4 years it may not be a "good deal", but if you can increase NOI 30-50% over that same time frame you may have a "good deal" on your hands. Develop the current P&L and then conduct the pro forma estimates in order to truly analyze the property! Good Luck!

    1Reply
  • Lisa DoudBusiness Member
    Investor · Portsmouth, VA · Member since 2014 · 75 posts · 72 votes
    2y

    Olu,  you need to be careful.  83K per unit seems kind of high for the age of the building.  Also If you are talking chesapeake and a 1912 building you are talking probably about South Norfolk area, and you need to know that you are subject to rental inspections in this area.  You can look this up by going to the city's web page and https://www.cityofchesapeake.net/424/Rental-Dwelling-Inspect... under the quick links at the bottom there is property search map. To schedule an inspection you can go to https://aca-prod.accela.com/CHESAPEAKE/customization/common/... which will take you through the process.

    The other thing you should be aware of is that somewhere in this property you are sure to have Knob and tube wiring.  Also anything that is build in the early 1900 usually has serious plumbing issues and foundation issues.  The important thing to find out if there were any major Electrial, Plumbing and HVAC renovations completed and the date.  Also take a look at the tax record https://parcelviewer.geodecisions.com/Chesapeake/Account/Log... see what other kind of structure are attached to the building.  

    I just know that if you have to fight the Historic Preservation Commission you have to be very careful.  If you have any questions about my fight with the HPC send me a private message or you can call my office.

    Hope this gives you some info to think about.

    Doud Realty Services, Inc.3.8205 Reviews
    WebsiteView Page
    3Reply
  • Account Closed
    Real Estate Broker · Minneapolis · Member since 2024 · 16 posts · 10 votes
    2y

    Hi Olu, 

    Some things are not adding up here. If the deal has been on the market for over a year, it's likely not an 8 cap. I don't know Chesapeake, but where I'm located, a true 8 cap wouldn't sit on the market. The broker is probably overstating NOI.

    I'd recommend doing your own underwriting to come up with a value. 

    Run your own rent comps for 1-Beds in that area. Research average opex per unit for that market.

    Sounds like this would be a big step for you. If you've done enough research, you shouldn't have to ask if this is a good deal. Which means, it's probably not. 

    0Reply
  • Jacob SloopBusiness Member
    Rental Property Investor · Virginia Beach, VA · Member since 2020 · 274 posts · 111 votes
    2y

    @Jonathan Greene

    Nailed it on the head here .

    If you need any help in the area send me a message , I’m in the Chesapeake Norfolk Virginia Beach market as a full time investor and agent

    [email protected]757-235-0369
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  • Patti RobertsonBusiness Member
    Property Manager · Virginia Beach, VA · Member since 2016 · 2k+ posts · 2k+ votes
    2y

    It would be a no buy for me based on the building age and one bedrooms. In our market one bedrooms are very hard to rent. Two bedroom rents aren't much more than one bedroom rents. Even someone with a one bedroom SEC 8 or HUD VASH voucher has enough budget to rent a 2 bedroom apartment. The people looking at one bedrooms are folks moving up from hotels - essentially homeless people. Vacancy and turnover will be way higher than a buidling with all or mostly 2 bedrooms.

    757-472-2547
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