LET'S ANALYZE THIS 33 Unit Apartment Deal together !!! MEMPHIS TN

[Darren Crawford]

Hi Bigger Pockets Family ….

So I wanted to share a deal I’m currently working on and hear everyone’s thoughts ,but before I do I’ll tell you how I found the deal.

Step.1

I located a market I wanted to invest in which happened to be Memphis ,TN due to a number of reasons then I narrowed down to about 4 zip codes I wanted to invest in.

Step.2

I made a list using Propstream (No I am not an affiliate just like the service )

Search Criteria

-Targeted 5+ unit Property owners

-Property Owners that owned for 10+ years or longer

-That had at least 50% equity

Step .3

Once I compiled my list I came up with around 169 property owners that met my basic criteria

Using Batch Skip Tracking I tracked down around 60% of the numbers to these potential sellers and started to cold call each one (NO RINGLESS VOICEMAILS ) by the third phone call I met a gentleman named Matt who stated he is a builder owned a number of properties all over memphis and two other markets and was interested in selling a 33 Unit apartment complex in Memphis TN.

Step 4 (Build Report )

After Speaking with Matt I discovered he is willing to sell a 33 unit complex in the Berclair 38108 area of Memphis using a 1031 Tax Deferred exchange account now the seller isn't the most motivated seller he is literally holding on to the property for a tax write off but would be willing to sell to use the capital to buy another larger property. He stated he bought the property 10 years ago for around $730k and would only entertain an offer of $800K or higher stated the building is 90% occupied and all rents are between $450-$500 also stated the rent could increase 20-30% after repairs are made. He said he hasn't been to the property in about 7 years but it has been well maintained through his property management team.

:: THE BREAK DOWN :::

(Berclair Area of Memphis TN 38108 which means it is in a C- area )

Asking Price $800K for 33 units complex

Repairs Estimate $200k

$1,000,000 divided by 33= $30,303 Cost per door

33 units Break down

Consisting of 50 % of the units 2/1 and the rest 1/1 and 3/2

Rented at $450 Per Month

33 units 90% occuppied =29 units

29 units at $450 per month = $13,050

Round all rents up to $450 per month each

Vacancy: 10%

Gross Annual Income $156,600

$156,600 (annual ) divide by 2 (50% Rule for expenses )= $78,300

NOI = $78,300

Cap Rate = 7.8% Cap Rate

Annual Property Tax = $3,100

Annual Insurance = $5,000

Management 10% = $1,300 per month

DSCR = 1.6

Step 5 ( Making the Offer )

I feel like $800k could be a little high so I plan to make two offers to see which would be more appealing to the seller

Offer 1 All Cash Offer of $770k (15 day inspection period )

Offer 2 Offer $800k but I would ask the seller to carry a second position loan for $300k at 6% interest amortized for 12 months (7 day inspection period)

My main strategy is the BRRR approach. I will use Hard Money at 9% amortized for 12 months. Within that time I plan to renovate the property, increase rents, get it to 100% occupancy then refinance at 5% amortized for 30 years.

What do you guys think ?

[Michael Ealy]

Originally posted by @Darren Crawford:

Hi Bigger Pockets Family ….

So I wanted to share a deal I’m currently working on and hear everyone’s thoughts ,but before I do I’ll tell you how I found the deal.

Step.1

I located a market I wanted to invest in which happened to be Memphis ,TN due to a number of reasons then I narrowed down to about 4 zip codes I wanted to invest in.

Step.2

I made a list using Propstream (No I am not an affiliate just like the service )

Search Criteria

-Targeted 5+ unit Property owners

-Property Owners that owned for 10+ years or longer

-That had at least 50% equity

Step .3

Once I compiled my list I came up with around 169 property owners that met my basic criteria

Using Batch Skip Tracking I tracked down around 60% of the numbers to these potential sellers and started to cold call each one (NO RINGLESS VOICEMAILS ) by the third phone call I met a gentleman named Matt who stated he is a builder owned a number of properties all over memphis and two other markets and was interested in selling a 33 Unit apartment complex in Memphis TN.

Step 4 (Build Report )

After Speaking with Matt I discovered he is willing to sell a 33 unit complex in the Berclair 38108 area of Memphis using a 1031 Tax Deferred exchange account now the seller isn't the most motivated seller he is literally holding on to the property for a tax write off but would be willing to sell to use the capital to buy another larger property. He stated he bought the property 10 years ago for around $730k and would only entertain an offer of $800K or higher stated the building is 90% occupied and all rents are between $450-$500 also stated the rent could increase 20-30% after repairs are made. He said he hasn't been to the property in about 7 years but it has been well maintained through his property management team.

:: THE BREAK DOWN :::

(Berclair Area of Memphis TN 38108 which means it is in a C- area )

Asking Price $800K for 33 units complex

Repairs Estimate $200k

$1,000,000 divided by 33= $30,303 Cost per door

33 units Break down

Consisting of 50 % of the units 2/1 and the rest 1/1 and 3/2

Rented at $450 Per Month

33 units 90% occuppied =29 units

29 units at $450 per month = $13,050

Round all rents up to $450 per month each

Vacancy: 10%

Gross Annual Income $156,600

$156,600 (annual ) divide by 2 (50% Rule for expenses )= $78,300

NOI = $78,300

Cap Rate = 7.8% Cap Rate

Annual Property Tax = $3,100

Annual Insurance = $5,000

Management 10% = $1,300 per month

DSCR = 1.6

Step 5 ( Making the Offer )

I feel like $800k could be a little high so I plan to make two offers to see which would be more appealing to the seller

Offer 1 All Cash Offer of $770k (15 day inspection period )

Offer 2 Offer $800k but I would ask the seller to carry a second position loan for $300k at 6% interest amortized for 12 months (7 day inspection period)

My main strategy is the BRRR approach. I will use Hard Money at 9% amortized for 12 months. Within that time I plan to renovate the property, increase rents, get it to 100% occupancy then refinance at 5% amortized for 30 years.

What do you guys think ?

If your numbers are accurate, it seems to be a good enough deal to submit an LOI to start the process.

I put in the numbers in my value-add analyzer. To be extra conservative, I put the renovation at $10K per door and the rent increase to be at 20% ($90/month/unit). My analyzer tells me "YES" the deal is worth looking into.

Here it is: