@Jason Maestas, I know I'm restarting an old post, but I'm curious if you moved forward on this project. I have to agree with the others that posted on this deal and say that at $660K, the price is still a little too high. If it's the same property I'm thinking about (a little bit better than a tear down on the far side of Plant City, almost to Kathleen), you have more deferred maintenance than most want to take on - the price will get better!
1. I'm going to disagree with @Account Closed on the pool. In the Tampa Bay market, especially Tampa's side of the I-4 corridor you have to have as many amenities as you can dig up. I manage a 273 door complex in Lakeland, right off of I-4. Perfect location, got everything going for it. We were able to raise the prices by almost $100/unit by putting in a pool! In the Polk county, east Hillsborough market, that pool will put you over the top and get you the rent you want - you're going to have to renovate to the 9s to get $800/month for 2/1s without the pool - definitely not granite countertops and stainless steel appliances, but the children's playground, pool, and dog park are a must!
2. Your pros:
You have central A/C (if you get them running)
You have washer/dryer hookups
You'll be completely renovated
Use these to your advantage! Plan on the property being vacant for at LEAST six months, and plan on every last current tenant up and leaving when the banging & clanging starts.
Your cons:
You're in Plant City! People that move to Plant City are there for the cheap rent, they're certainly not there for the view, you HAVE to wow them with amenities, and upgrades.
3. Whatever company is trying to sell you on 10% management fees has a good racket going - Don't get played! We charge 5% of gross lease to manage, with a $250 leasing fee that gets paid out as bonuses to the maintenance staff that got the unit rent ready. When you go over 50 units, we go down to 2.5%...10% has gone the way of the dodo.
4. Plan on at least 25% vacancy for the first year - the property has established a reputation for being a trash heap. Until you start getting good feedback from new tenants (stellar renovation, quick response time on any repairs, world class amenities, etc.), you're going to be holding on to a lot of vacant doors.
5. Your maintenance and repair needs to be higher, as well as your taxes. As you begin to renovate, your assessed value is going to shoot through the roof, as will your taxes. Plan on 10K-15K if you're lucky.
ALWAYS factor 10% for repairs, when you're wrong, GREAT!, when you get hit with three A/C units conking out at once, and a pool crack, you'll be thankful you left 10% aside every month on TOP of your 5-7% reserves.
6. A 12% Cap would be correct, if the property was in decent shape. For a tear down, you're looking at a 20+% Cap. If the guy wants to get out, offer him $400K-450K, and see what he does.
Here's to hoping you got this one, and this was just a venting exercise for me on those 10% management fees!
