My Second Deal - 9 Unit BRRR

[Brandon Davis]

Straight and to the point.

9 Unit Multi Family

Asking price : 399k

NOI based on rent roll 2015 : $27,140 ( if rents were right, 43k)

Cap Rate : 8.39%

200k to 300k to rehab property

A 9 unit property has come on the market. 

Reason being, the roof started leaking and collapsed in the beginning of 2016. The building was condemned by the city in 03/16. 

The building was left in disrepair until now. Severe water damage occurred in the second floor and first floor. New electrical, new plumbing, and odds and ends for city code stuff. 

A new roof was finally put on after a year so they could try to get it back on the market. A closed cell poly-eurethane foam system.

Fortunately the property is reinforced steel and concrete from the 1940's so the bones are okay. The foundation is fine.

This property is an eye sore in the best part of town. 

I was able to get rent roll from the property in 2015. the gross income is around 62k and the NOI is $27,140. The cap rate in my area is 8.39% based on 5 comps that have sold within the past 2 years. That would put the offer price at 320k if it was up and running properly. But, It's not.

I will have to gut the entire building. I estimate the costs to be between 250k to 300k.

The tax appraisal is at 440k and similar properties have sold for just over 500k in the past year. 

His rents are are about $200 per unit under what they should be. If I could get the rents to where they need to be, I could probably refinance for 550k. 

What would you offer based on how much money has to be put in? Is there a way to get this deal done? Great location. Big growth opportunity due to thousands of new jobs, med school being built less than a mile away, and low supply of affordable non rentals. Numbers don't make sense to me though.

Thoughts? 

Thanks!