All Forum Posts by: Chad Drewson

did you include a vacancy rate? Why use 8% for the PM fee instead of the standard 10%?

new to all this so sorry for the basic overall strategy question. I'll be selling inherited apartments soon, around 30 units. the rents were well below market and this has been reflected in the commercial appraisal price. should be value to the potential buyer we'll be meeting with. what strategy would others use when entering into negotiations in this type of situation? what i'm thinking now is to point out the upside in revenue and appreciation, ask for the appraisal price, and not be very negotiable on the fixes inspectors find. i'm not against hiring a property management company (i've been doing maintenance the last few years) and revisit down the road once rents are in-line, but i'm not the only party involved in that decision. i've also been told few deals end at appraisal price, so i could be in left field. thanks ahead of time for any insights.

I'm new to the buy/sell side of real estate. i've been running an apartment complex for the last few years that was inherited. it's around 30 units, and my question is about the commercial appraisal now that i'm at the point of selling. our apartments are at full occupancy and stay that way partly due to below market rents. we had 1 apartment open when it was appraised that's now already rented, a few weeks later. the appraiser listed a 5% vacancy and collections loss across the board and 10% for the 4-plex with the vacancy listed. this takes off tens of thousands to the appraisal price from the 2-3% i'd calculated. i asked him about it and the answer was that it was a forward projection and that was it. the apartments are 1 bedroom which are in short supply in my area. he admitted to not knowing the supply picture for 1 bedrooms here.

there aren't a lot of commercial appraisers where i am. if he's picked by a buyer's bank i'm worried i'll get hit with the same vacancy number. if he's projecting that the buyer will have higher vacancy with higher rents, then i feel i'm getting double-whammied because i'm losing out on the income from higher rents (which i understand) while also paying for it on the expense side. Maybe i'm missing something or not thinking about it correctly. Any thoughts would be appreciated.