14x 1BR/1BA units in an apartment building?

Question

Wondering what yall think. This is a wholetail scenario...hard money and short closing time window. I would be an absentee owner, but it seems the they're all rented and just in steady state.

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• Fourteen units in the same complex, in San Antonio.
• $700k + $12k closing
• all 1br/1ba.
• all currently rented between $750-$850/mo
• described as all units "in great condition with recent updates"
• Rent income = $131k/yr
• Expenses = $54k (HOA, taxes, insurance, utilities)
• avg ~ $50k/unit. Tax Assessed value = $28k/unit.
• hard to get a good comp idea....not much public information on recent sales.

I have not factored in mortgage, vacancy, management fee, CapEx, eventual 6% realtor fee, etc.

Wondering what yall think of an offering like this?

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Will Pritchett · Answer

@Adam L. I’ve seen this deal (I believe it’s the same one). The condo structure is what concerns me as well. As other posters mentioned, it’s out of your control. I would venture to say it’s a C or C minus property with no changes in the area on the horizon. I don’t know your experience level but it could be challenging from afar (or nearby). Not to discourage you on it.

I just like control too much, perhaps. If it was just an apartment building I would find it more interesting as well.

Best of luck and if you take it down, let us know how it goes and hopefully that we were all overly cautious.

Take care,

Will

Greg Scott · Answer

When you said $700K for 14 units, generally that sounds like a very good deal for an apartment in San Antonio. When I noticed you mentioned it had an HOA, then I realized you were talking a fractured Condo deal which is less intriguing.

Just know that a good chunk of your investment is dependent on how the HOA performs.  It is something that is out of your control unless you have more votes than all other owners in the complex.  Do you at least have contiguous units or own all units in one building?   Condos can be a challenge if your resident gets in a tiff with a neighbor and the neighbor is an owner...even if the neighbor was in the wrong.  Also, the HOA may have/make rules that limit your ability to effectively manage the property later.

Regarding the tax assessment vs asking price, the tax assessment has no bearing on purchase price. Ignore that.  On the other hand, tax assessment vs closing price could impact you with higher property taxes after you buy.  To be conservative, assume assessment will rise to match what you paid for the units.

Now, if you can acquire all the other condos in that association and turn it into an apartment, you may be printing money.

Adam L. · Answer

yea. wholesaler. Best offer I think...I've found that this one wholesaler often isn't the most forth coming with crucial details...

they had a great option a few weeks ago in Killeen, but it took 5 emails for them to tell me the place was abandoned the last 2 years and that a homeless guy got murdered in it.

Will Pritchett · Answer

@Adam L. I didn’t see that sale price. Where did you find it? Wholesaler?

Adam L. · Answer

@Will Pritchett did you see the closing price? How do you feel at that price? $851k

Adam L. · Answer

@Will Pritchett

agreed. See the street view? Doesn't look the 'nicest'

Rick Pozos · Answer

The appraisal price DOES matter. If units are valued so low with the county, they are probably priced that low for a reason!!

I dont know any units that are valued that low that actually have $750 to 850 rent. Maybe on section 8? The condo fee is what is really going to kill you. You would have to get a seat at the table to have some control of the board.

Bob Norton · Answer

@Adam L. My estimate of the cap rate was just above 9%, with you limited data.  That's why I said it was worth looking into.  Apartments are selling around a 5% cap rate.  So, there appears to be opportunity here.

The door price does not matter as much to me as long as the cash flow is solid.  The door price is simply a quick way to compare properties and look for opportunities.

You will need to do an inspection to determine the deferred maintenance and evaluate your CapEx rate.  I'd get it under contract first with a generous time for due diligence.

You will also need to check the rents in the area to see if there is any room for improvement.  If they are renting at the top of the market, then you are going to need very good numbers on your maintenance and capex costs to determine if this is a deal.

Adam L. · Answer

@James Miller, @Bob Norton

Agreed, thank you for that feedback. I'm told there's no upcoming HOA assessments but I have not seen any disclosures yet. Any tips on pressing this a bit deeper?

What would your criteria be for CapEx and COC, IRR? What are your targets?

I'm concerned about the listing price...Tax Assessed @ $30k/ea but wants to sell for $50k/ea and is claiming upwards of $800k ARV.

https://dealcheck.io/s/-MRfvBs...

James Miller · Answer

@Adam L.

I agree with Bob on the deferred maintenance and how does an hoa fee work for an apartment complex?

14x 1BR/1BA units in an apartment building?

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