12 units apartment deal in Virginia

[Olu Efunwoye]

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.

[Lisa Doud]

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.