Potential Large Multifamily Deal

[Michael Logan]

Hello All,

I am looking for any input you're willing to give regarding this deal.  

** Seller is asking 2.5M for 66 units, as-is of course.  He says he is selling because he has an opportunity elsewhere right now.

I've been told the cap rate for our local area is 6%. Rents after renovation are conservatively $550/month on average, $625 on the high end. This complex is the only thing bringing this area down. It's located in the city with the most desirable school systems in our area.

48 Unit Apartments

• All 2 bed, 1.5 baths.  More than half of the units are vacant, bad tenants being evicted.
• June’s gross income was approx. $15k.  This will decrease as tenants are being evicted.
• Only 2 Units are close to being completely renovated.
• Most appliances were beyond repair.  All units will have dishwashers.
• Annual Taxes and Insurance currently $17040
• Roof:was told it was approx. 6-7 years old. No documentation.
• All new windows and HVAC units purchase and being stored within the two 6000 SF basements.
• All HVAC units already installed except 12
• Has on-site laborer for window inst.: $38 per window to remove and replace.
• Office and Laundry have been renovated.Owner pays approx. $500 per month for utilities.
• Guys working for him at the moment would like to stay.
• Cabinet guy makes $15/hr.  Would make an excellent maintenance man.
• 5 or 6 sets of cabinets ready for installation now.
• 3-4 laborers making $8-10 per hour
• 8-10 units have been completely re-plumbed
• Current owner has probably spent about $400k so far ($5-6k on landscaping)
• All units are about 850 SF
• Renovation Estimate: $11,000 per unit (46 units) + 20% contingency fund = $607,200
• Tenants pay all utilities.
• Includes Pool

Townhouses (18)

• Only 4 vacant units.
• Roofs are all in decent shape.
• None of them should have to be gutted. They are in decent shape.
• Maybe sell them with owner financing one by one.

Any advice is very much appreciated.  Would you chase this deal at all?

Thanks,

- Michael!