1st deal - Please help on the Analysis and pricing.

[Naveen kumar Vadlamudi]

Hello All,

i came across this college town property - it is a value add opportunity.

14 Unit Complex - 12 2bed/1bath & 2 1bed/1bath * Separate electric and water meters. Central heat & air*

I made this below chart based on this community shared knowledge (Thank you all).

Need

1. would you consider this property at all ? if so why ?

2. can i pursue this opportunity and fix it to add value as a first timer?

3. what is the good price+/- to offer on this property ?

Note: I know that it is currently bleeding but given the price and fixing it up a bit ,may be a good one. I am open to take any feedback on suggestions for a 1st timer.

Thanks in Advance

[Greg Kasmer]

@Naveen kumar Vadlamudi - Thanks for sharing the information. I think this is a great "real life" example to share and get other opinions. Some of my comments are: 

1) Do you know the current condition of the units? $75k for 14 units means about $5k per unit to bring it up to market ready rents. That seems very light to me. If it's just painting, fixtures, and some other superficial updates that could work. However, if you're talking about flooring, tile, cabinetry, electrical, plumbing, etc... that will add up quickly. 

2) Did you confirm the market rents in several ways/methods? I would use online platforms (zillow, etc..), rentometer, and calling competitive properties to "price shop". Rents are moving and I would double/triple check so you are super confident in the rates. 

3) Insurance seems low at only $3,000 per year for 14 units. Not sure of your area, but I would definitely get a quote from a broker/agent to verify. I'm seeing about $600-$1,000 per unit in my area. (PA, DE, NJ) But this is totally dependent on your location. 

4) What type of loan product are you using? I would find out their DSCR ratio and make sure you can hit their minimums either upon purchase or when they desire those ratios (maybe after stabilization in a year or so).

5) Unit Turns/ Re-Leasing. Typically I would account for the cost to turn a unit into the expense line items. For example, if you think 25% of the units will turn over in a given year you might have to paint the unit, make minor repairs, and then pay an agent to re-lease it. Re-leasing is likely a month rent, plus whatever painting/repairs you do.

Not sure if this is a "good deal" yet as it would depend on your proforma and projections after you consider the above. I would also suggest looking at the IRR of this deal as you have some moving parts on this deal (renovations, etc...) and also include your exit strategy (refinance or selling) into your modeling as well.

Good Luck!