30 plex deal analysis

[Matthew Yrungaray]

Hello all,

I am working on a 30 unit multi family property in SLC, UT. Each unit is 900 sq ft, 2 bed 1 bath. Units are updated and about 40 years old. Vacancy has been almost 0 in the last 10 years. The rents are perhaps $25 under market. There is no deferred maintaince, PM has done a great job keeping up the property. Here are some other details:

Asking price: $2.2M

Gross income: $234,880

Expenses: $76,760

NOI: $168,248

LTV 80%

debt service: $139,400 (20 amort. @ 5%)

Cash flow: $28,865

Cap rate: 7.6%

(It seems that most investors are looking at higher cap rates but this seems to be better than most in this area and for this quality of property)

I have a million questions:

How do I protect myself and investors from the short fixed rate period?

Should I offer as a private mortgage opportunity?

how structure the ownership of the deal when most of the cash is coming from other investors? I want the equity and I am willing to forgo the current income.

I have other questions but I think that they may be answered along the way.

Thanks to anyone that has some insight

Matt from the Salt City.

[Joel Owens]

Matt I have heard in Utah things trading at crazy caps like 5 to 6 from an investor I talked to months ago that lives there. I do not know that market or what it is doing now.

It would be possible to hit 32% but the owner would have to self manage and patch things instead of replace.

The 50% costs (60% if landlord pays utility) is based on a cost over time.

Example I looked at a property for my client the other day. 8.5 cap and good area. Seller was touting 45% expenses and had tax returns to back it up. Problem was the place was 13 years old. All A/C's were original, roof was original, water heaters, etc.

Guess what my buyer will be slammed with in heavy costs over the next 5 to 7 years of ownership?? You guessed it all the expensive stuff that will make the cash flow much less than the seller was stating with past years returns. The seller was looking for a less experienced broker and buyer to not catch these things.

Seller wouldn't go down on price so we passed. NEVER buy into a bad deal as that anchor around your neck will make you drown.