45 Unit Multifamily in One Horse Town (Toledo Ohio Area)

[Curtis Hummel]

Hello All,

What are your thoughts about investing in small towns. I was informed of a 45 unit apartment deal in a town I am very familiar with. Its section 8 and based on the numbers I have its definitely cash flow positive . Great building, great price but my only concern is do I wager a huge debt on a small town even if its a cash cow day one? 

Any input appreciated!

[Andrew Johnson]

Curtis Hummel Is the property managed by a 3rd party? If so, it’s always easier for me to buy-off on the numbers. If it’s self-managed it’s pretty easy to massage numbers. It doesn’t mean they did do that but it’s good to be aware of when looking at a T12. I think your biggest exposure is on the rehabish side. A lot of people run through units and think “oh, it’s just $1K-$3K per unit to freshen it up” but $3K * 45 units = real money!

My limited experience is the properties always go through some first year stabilization hiccups. So in your shoes I’d be less concerned about “massive debt” and more concerned about “heavy reserves” post-down payment. And, it’s a small thing, but don’t underestimate the costs of inspections and appraisals for 45 units...not...cheap.