All Forum Posts by: Scott Skinger

Interesting. I don't know that there is going to be an "official" way of valuing these properties but my thought would be to value them both as residential and commercial properties and see what the numbers look like compared to each other.

The good thing about valuing them as the seller is (commercial) is that you are at least valuing based on black and white numbers. If you're goal is cash flow then you would want to base your decision to purchase or not on the actual numbers anyway and not just comps from other properties. 

If you fast forward to when you want to sell, I would suspect that a buyer would (I would) also want to evaluate the purchase on the numbers. Might be pretty difficult to come up with comps that replicate the situation you are describing.

Good luck!

-Scott

@Aron Siva I had the same question and asked about a week ago. See responses here, https://www.biggerpockets.com/forums/432/topics/51...

@Yonah Weiss Thank you for the feedback, I appreciate it! The loan terms are from a Freddie Mac loan commitment based on a $1MM+ loan. 30 year amortization, 10 year payback (see attached). The loan quote shown is based on a $50K higher price, I would offer $50K less so the loan would be right at $1MM. I forgot to factor in the interest only portion for the first 3 years...that will make the CoC returns even better. The only thing that I don't understand is the "Prepay during Fixed, Floating" terms. I'm assuming that it is defining what prepayment penalty i will have to pay if I pay off the loan early but I'm not sure how to interpret it. Anyone have feedback on this? Thanks again!

-Scott

Hi Aron,

I'm new as well in roughly the same space that you are in. Obviously, there is a lot of information right here within this forum. Some simple searches will reveal some of what you're looking for. Here are some other ideas to start learning about the questions you're asking:

1. Keyword alerts with "apartments", etc. You will get a lot of notifications every day that will provide valuable information.

2. Michael Blank website/podcast. Great info. This will keep you busy for weeks/months and super, super informative.

3. Books. Crushing it by Brian Murray, How to make big money in small apartments by Lance Edwards. I'm reading Multi-Family Millions by Lindahl right now...so far so good.

I'm happy to share/trade info as well. Good luck!

-Scott

Hi Adam,

I would be interested in learning more. I can fill out a NDA and/or jump on the phone with you if that would be helpful. I'm stepping into a meeting right now but let me know next steps and I will follow up ASAP.

Thanks in advance,

Scott

Hi Michael,

I would be interested in seeing OM, T12 financials and rent roll if possible. Thanks in advance!

-Scott

Hi All,

New investor looking for a little feedback and/or constructive criticism on a deal I'm analyzing. This is a mixed unit building, 8 apartments (1BR/1B) and 2 retail offices. Offices are leased up for 5+ years with long term stable businesses. Apartments have historic 100% occupancy. Rents are only slightly below market, $50-$100. Roof and windows were all replaced last year, but older brick building built in 1930. Great location in Chicago suburbs, short walk to public transportation. 

I have attached the numbers and my analysis. Strategy is long term buy and hold for passive income. Numbers below are run with a disposition at 10 years with a 7% cap rate at time of sale. Any help or feedback is greatly appreciated.

Thanks in advance,

Scott

@Russell Brazil

Thanks for the response. There is a discrepancy between the NOI posted on the listing ($91,244) and within the OM ($100,206). They have also "included" a 5% vacancy rate without actually subtracting it out when they are calculating the Gross Income.

The cap rate is higher than the normal cap rate for this area, but then again, their 7.2% cap rate is going to be much lower with all of the adjustments.

Thanks again,

Scott

URL without the "link code" which I'm assuming is some kind of tracking:

http://www.loopnet.com/Listing/712-716-Lee-St-Des-Plaines-IL/9019453/

Continuing this conversation to better understand how things work. So, as I mentioned previously, the property has a good cap rate of 7.2% considering great location, class B building, 100% occupancy, new roof and new windows. Expenses are at 35% in OM with the capex reserves below the line. The broker's projected CoC is 10.5%.

BUT, my calculated CoC with debt service (25 year, 25% down @ 5%) is terrible, under 2%. That is if I use 7.5% for my capex reserves plus add in a little extra on top of what they budgeted for general maintenance. I'm setting expenses at 45% for my CoC calculations.

I understand that the "right" answer is probably to just walk away, this property won't work. For the sake of learning though, I'm planning on reaching out to the broker today and explaining my reasoning on why the list price doesn't work, let him know that I'm looking for 10%+ CoC and run down the problems with his projections. What is tripping me up a bit though is why my CoC numbers are so far off from his when the cap rate seems reasonable. I need to offer around $1MM on a $1.395MM list price before the numbers start to make sense. 

BTW, if you're interested in seeing the property or OM, here it is, http://www.loopnet.com/Listing/712-716-Lee-St-Des-Plaines-IL/9019453/?LinkCode=31817