Opportunity? Or nightmare waiting to happen

[Jason Hill]

I found a 36 unit apartment complex in a class C neighborhood that is being sold with owner financing. So i thought opportunity right? So i contacted the number they sent me a package with all the numbers and what not. They asking price is 800k. The package i was sent said 10.8% after repair proforma cap rate. The crazy part to me is that only 9 units are occupied!!!! What would you do?

[Robbie Reutzel]

@Jason Hill, this all comes down to what the market looks like.  What is the vacancy rate for similar buildings in that market?  How much rehab would you need to get it to that condition?  As @Andrew Beauchemin said, you should be consulting your team for this information.  A good team should be able to tell you market cap rate, market rents, market vacancy rates etc.

Once you get those numbers you can more accurately underwrite the deal. 

Last thing is to ALWAYS only offer based on ACTUALS, not pro forma.  

Good luck!