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Updated over 4 years ago on . Most recent reply
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52 Unit Multifamily: Buy or Bail?
Love some feedback, thoughts, comments on this:
We have this 52 Unit under contract. It seems as though we are in a bit of a potentially unstable market when considering, Covid-19, Election, no evictions, population decrease in the county and state this is located. But the numbers still look solid....
Highlights:
52 units over 6 buildings. (46) 2 bed/1.5 bath townhouses and 6 apartment flat stye averaging 971 sqft. Brick exteriors, sloped, shingle roofs)
Gross Annual Rents: $408k ($654/unit/month). Gross Annual Expenses: $190k (prop taxes are $56k/year, trying to find out if they will increase substantially upon purchase).
Tenants Pay: Electric, Water, Sewer
Currently 100% occupied and we're told near 100% collections even though landlords are subjected to the no eviction order.
The Business plan: Purchase, cosmetic rehab 25 of the 52 units @$12,000/unit ($300k). Raise rents. Cash-out Refi.
With the property being 100% occupied, we will execute the 25 rehabs fairly slowly over 2-2.5 years and target the cash out refi in year 3-3.5 once rents have been pushed up.
So, the million dollar question: what would be a good price to pay for this property and should we buy it???
Other important notes:
- We tentatively have financing in place: 4.25%, 25% down, 20 year amortization, 3 year balloon.
- We only have $300k cash currently collected. Not nearly enough for both downpayment, closing costs and the $300k renovation budget (need about $1M).
- We have the option to buy less buildings/units if we can't secure financing for the complete purchase/can't come up with enough down.
-We have a seasoned/reputable Pm lined up to manage and we already own 40 units in the area over 3 properties.
Thanks all in advance for the wisdom and feedback!
Zane
Most Popular Reply
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@Zane Belden
I’d partner with someone who has a larger ability to raise and can maybe assist you to get a better loan (you could do better).
Seems like you’ve got a nice value add deal. There is a ton of capital seeking yield right now and it honestly shouldn’t be hard to raise the money you need. So maybe a co-syndicator or another partner in the deal so a good one doesn’t get away.