All Forum Posts by: Account Closed

@Vince Gethings - The operating expenses seem low at $2,970 per unit.  You may be accounting for property management in your underwriting but I didn't see it listed.  It seems like the cap rate would actually be lower with market based expenses. 

I think it would help to see your underwriting and projections:

Can the rents just be increased, or is renovation required to bring them to market rates?  

Do you expect taxes to increase following the purchase?  

Is your insurance rate going to be in line with what's listed?  

What is your management cost?

What kind of return are you looking to achieve?

I think once these questions are answered, you can figure out the price that makes sense to you.

Hope this helps.

@Account Closed check out "How to Read a Rent Roll: A Guide to Understanding Rental Income".

@Bruce Morris - I recently worked on some rent comparability/appraisal assignments for multifamily properties in that region (Roanoke, Lynchburg, Gretna).  Overall, I didn't see a ton of recent sales over the past year or two and I did a pretty extensive search.  Most of what I saw sold for more than I would have expected in the region.  I'm not sure what size properties you're looking for but I searched 25-200 units.   

@Tom Moran - @James Kojo makes some great points and it would be beneficial to know your long term strategy for the investment.   I have a close family friend that does well with properties in D Class areas but he is very hands on and goes door to door on the 1st to collect rents.  Many of his properties are worth equal to, or less than, the price he paid for them 20+ years ago.  The cash flow is great but long term he's seeing very little, if any, appreciation.  Given that it's only six properties, I'd probably review each property individually.  Is he offering some sort of discount to purchase the whole portfolio?   As James mentioned, you need very large gross yields to compensate for the tenancy and market risk. 

@Andrew Moran In the past, I had a property management company manage a couple small rentals for me because I had a very demanding day job and traveled a lot.  They focused on managing single-family and small multifamily buildings.  I believe they managed 500+ units with more than a couple hundred owners.  They had multiple property managers at the company and assigned you one.  I met with the owner of the company but not the person that ended up managing my units.  Overall, her performance was sub par and she wasn't great at customer service/getting along with the tenants.  Eventually, I asked for a different manager at the same company.  His communication was great and he provided great customer service.  If I were to do it again, I would absolutely meet with the person that was going to manage my units directly, not just the owner.  Just something to keep in mind when you are interviewing PMs.

@Michael Dang - here is a free resource to check if your property is in a flood zone.  https://msc.fema.gov/portal

I also use Flood Insights but it's a paid subscription.

@David Calme - You're welcome. For a building that size, it should be no problem for them to show you T12.

@David Calme - I agree with @Michael Ohara, the utilities seem low.  Even if tenants pay water, sewer, and trash, that would probably be a bit low as you'd be paying for utilities in any vacant units. 

I'd increase vacancy, especially given the size of the property with only 19 units.

I think an expense ratio of 41% for a property of this size is a bit low.  It's tough to say without seeing historicals but I would probably beef up the expenses a bit more.  If the owner pays for water/sewer, I would think you'd be closer to 50%.

I agree with @Bruce Petersen on this one.  Taxation is very localized.  I would speak to some local attorneys that deal with multifamily real estate taxation/appeals, property managers, and/or a property tax consultant.  They should be able to give you the lay of the land and what to expect.  In my local market, some municipalities are extremely aggressive on re-assessments and will go to 100 percent of sales price.  You can appeal but it's tough to tell how much, if any, your assessment will be reduced. 

@Bill E. what do you plan to use this cap rate information for?  That will be hard to find but you could possibly find cap rates for the broader Pittsburgh market. I'd check the larger brokerages for local reports.