18-unit BRRRR Analysis

[Simon Wold]

Hey All-

Came across a property today. Here is the link to my quick analysis:

It is going to go to auction on Friday and opening bid is 413k. I think the deal looks great, but would like others opinions! I have three rentals (two 4-plexes and one condo) so I have some experience, but nothing of this scale. My plan would be to use the BRRRR strategy on this one.

Is anyone familiar with financing these deals? I have private money available to make the 450k purchase cost, but would have to get the construction costs elsewhere. Could a HML be acquired after purchase to pay for rehab? Could a HML be used instead of a private money investor to purchase / rehab? Any help is greatly appreciated. I am more unprepared in terms of having my financing options available for a property this scale, but this deal seems too good to pass up!

To note:

• Property was mismanaged by new owner and led to foreclosure. See: http://www.apartmentratings.com/wa/tacoma/carlyle-apartments_253581061498499/
• 200k rehab budget may be excessive. From the reviews it looks like it is going to need flooring, ext/int paint, cabinets, upgraded entry doors, maybe windows.
• ARV will be ~1,000,000. I put 900k to be conservative.

[Curtis Bidwell]

Hi @Simon Wold  I have driven by this property and have some level of interest, though the timing probably doesn't work for me currently.  I think if it goes for anything near $450k you should snag it up quick.  Though my best guess is that it will go somewhere north of $600k, perhaps even $800k.  Updated, repaired and stabilized I could easily see a value of $1.2m with current market rents. 

Understand that the neighborhood is rough!  It backs up to McChord Air base and the whole neighborhood is challenged.  Not to say you can't make it work, but know what your getting into.  I wouldn't classify it as a war zone, but very close! Drugs, registered sex offenders (7 on that side of the freeway), gang affiliates, etc. are all nearby. 

They have updated a few of the aluminum windows to vinyl but most of them need replacing, especially the South side that is exposed to the sun and weather -the fronts are protected by walkway overhang so not as critical in the short term. The siding on the East and South also needs replacing - very weathered.  Its a flat roof, so there could be issues there depending on when it was last serviced.

The property is in a decent setting and could be park-like with the large trees and yard. There are 4 sets of washer/dryers.  They should contribute about $600/mo. 

My last rehab averaged just over $6000/unit.  That included some common area work and external paint.   With siding issues and some unknowns, your  $200k budget is wise.

Financing is definitely different than your 4-plex's.  I would expect about 4.5%-5% 20-25 year am, 5 year fixed.  1/2% loan fee, plus appraisal, title, escrow, etc. 

Let me know if you get involved!