All Forum Posts by: Dave Bingham

Congratulations Roger!

Hi Kyle and welcome to the world of multi-family apartments! There are many things to look at when determining if something is a good deal in regards to apartments. Things from negative externalities, occupancy of the prospective property, occupancy of the area in general, unit mix, condition of the property, what class it is and the cap rates associated with those assets in that particular market, etc...

I didn't see an occupancy figure in their summary. Sometimes they give the unit mix and unit availability but not the occupancy. You can then work forward and determine what the occupancy is for the property and which units they are having a hard time filling. At that point you can try and see if these are problems with the units themselves, property specific (management) or represent a more general trend in the market having difficulties filling a unit type.

All of their units are 2 bedrooms so that concerns me.  You have zero redundancy if the market favors 1 or 3 bedrooms. You can always adapt but it's pricey and most of the time not worth it.  I'd suggest calling the broker for occupancy percentage. I'm familiar with this area. It's east of Suitcase city so extremely transient tenants won't be a problem but the last time I checked it was populated by probably 40-50%, as an educated guess, by students. Call the local apartments that are comparable and let them know what you are doing. Most will freely give you information about their occupancy, rates, concessions, thoughts on the market if you promise to reciprocate and send them back the information you've gathered from others. They perform this task routinely and having someone else do it for them can free up an afternoon for a listing agent, managers like that they are available to show apartments and not have their noses stuck in the computer.

Just because it is populated, last I looked, heavily by students doesn't mean it's a deal breaker especially as it is in Florida. You can call local places that specialize in having the snowbirds for the winter and those that specialize in housing young people coming to enjoy the beach in the summer but it will take work. If you don't keep those units filled you can kiss your NOI goodbye, maybe even your investment. Also bear in mind that this is a lot of turnover. This will greatly increase your expenses but it beats empty units.

Before you jump right in I'd have a competent real estate attorney, a CPA that specializes in real estate and a property management company you'd like to go with. The last one is going to depend on which type of investment you'll go for. Get the right property management for the right class of asset. You'll rue the day you picked them if you don't follow that advice.

This is an excellent book to get you started:

http://www.appraisalinstitute.org/the-valuation-of-apartment-properties-second-edition/

Also check out:

http://www.irem.org/

Great job Mark! Keep at it!

Welcome Mike

I'm with @Doug Merriott and @Amanda Young. Go to the REIA's locally and continue to utilize the sources on BP. Impatience is the progenitor of becoming broke and or frustrated.

Westchase in Tampa has a nice row of shops and the neighborhoods themselves have nicely paved sidewalks. Further north on Hwy. 41 are the neighborhoods of Wilderness Lake and Connerton. Both places have very well manicured houses and "fun areas". Wilderness has 2 large community pools, a pretty decent community center and access to free canoe launch at the local lake. Connerton has insanely wide sidewalks (I could drive my SUV on it with ease, it's that wide) in the neighborhood and great parks for the kids (think zip line) and a mini water park at the community pool. Though both are out "in the boonies" from Tampa. I just moved into Connerton and love it. It's about a 5 mile drive to a big box but that's not bad. It's just not what I think you're looking for as far as shops. Downtown Tampa has the Channelside district. It's the mecca for hipsters and empty nesters. Think high rise condo's/flats.  There are all sorts of things to do down there. Good luck with it guys.

Great job Amanda. Keep at it!

Welcome to BP Tahir!

Amir,

It's not going to be a straight forward valuation. You mentioned repairs. Are these repairs that will impact the unit availability or are they cosmetic? Entering a deal where you have all your units available to rent immediately or where there is a lag time of 3-6 months will greatly impact its value.

The unit mix or lack thereof concerns me. Even 1 bedroom communities transform into other areas in time. You're then stuck with an asset that you can't rent (liability) or do so but may not cover you O.E./ Debt service or you're agonizing over converting it into 2 bedrooms or something else that fits your market. You do not want to be in this situation. Almost any decision is the wrong one when you're facing that reality.

In general when looking at valuing a vacant complex I look at the following:

Unit Mix- As the demographics change will those units be able to offset the units that are "out of season"?

Unit availability- What percentage of units are available day 1 to rent?

Competitors- What are their rates and their occupancy? Dig deeper here, most stop here and think they know the market. Are they offering concessions? What's the job growth like in the area? What types of jobs are being created?

Lease up time- You will not be able to get to 90% occupancy quickly unless you give the units away. The carrying costs will not be offset during this time of reduced income.

Good luck with it!

This is a C class area at best Ardijan. I'd be looking for at least a 10% cap if you're looking to invest in these areas.

Look into these areas. You'll pay more but you're not fighting much in the way of negative externalities.

http://www.tampagov.net/dept_economic_and_urban_development/programs_and_services/community_redevelopment_areas/