Cap Rate or MAO (ARV - Repairs) on 25% Cap Pro-Forma SFR/Multi

[Phil Ostrowski]

Biggerpocketers,

There is an opportunity to purchase 25 units for just under $1M. It is a mix of 14 multifamily units consisting of 2x duplexes and 2x 5-units, plus an additional 11 SFRs in various towns on the east coast, all assets within 25 miles of each other +/-. A few units need light rehab and are vacant.  As-is cap is at 15%. Once rehabbed, the 5 vacant units will bring this up to pro-forma 25% cap rate based on the above purchase price. No liens on any of the assets, owned free & clear.  

Question being...for an offer to the highly motivated seller and to attribute a value to the 12 SFR's in the portfolio, is the MAO approach used for the 12 SFRs...and cap rate for the multi units?  To bring in 25% annually overall regarding the income of all units would be attractive for sure, stable rents, long-term leases in place.

Even at market cap, the portfolio could be worth $2M+ based on NOI, etc....but...the SFRs in the mix create complexity in coming up with a purchase offer. We have one in mind, seller has already agreed, can easily go to contract now on it. Split the SFR's into a MAO scenario and the multi units into a 2nd scenario...2 offer contracts?

Any/all thoughts are welcome, feel free to reach out or comment here.  If we take it down, we're open to an equity-share for investors that assist in the acquisition.

-Phil

Ingen