88 unit value-add Deal question

[James Wheelock]

Okay so my fiancé and I tackled our first deal which was a four unit that cash flows great for us now. Since then we watched @BrandonTurner talk about approaching complex owners on one of the webinars. So I decided to pull the trigger, and did a small mailer to apartment complex owners in my area. Low and behold, it freakin worked! I got a call from an older gentleman who owns and self manages an 88 unit he developed himself. I do believe he has taken a liking to us and may sell to us in the future. Here's my question. If I were to approach him with a value add deal proposition, how does one accurately determine what this commercial property is worth as it sits, and also the ARV?! I mean I know my market numbers for small multi family in my area. But this is a very new complex in a great location that brings in gross rents of ~67k. Wouldn't know where to begin with that animal of an appraisal.

[Roy N.]

@James Wheelock

An 88-unit complex is night and day from a quadraplex.   I presume that 67K gross rent is per month (~800K / year)? 

Why not first approach him as an apprentice?  You indicated he is elderly {which means something different depending if you are 20 or 50}, so there are probably aspects of managing the buildings that he finds more challenging than 20-years ago.   You could assist and, in the process, learn how a larger property operates.

In a complex that size he is going to have 1{very busy} or 2 supers living in the buildings who should be handling the day-to-day basics (collecting rent, plunging toilets, cleaning and make-ready during turnover).   He may also have a {semi}-dedicated maintenance person (who could overlap with one of the supers).

A property of that size is valued as a business - based upon the cash-flow it throws off ... which, if the property is performing well should be in the neighbourhood of $300 - $350K (before debt service and reserves).   Purchase price will be driven by your market, but around here, if the property is well maintained and the business is firing on all cylinders, you would be looking at a purchase price in the range of $5.5 - 6.5M for that kind of cashflow.