All Forum Posts by: Joseph Gozlan

sounds like a good value add opportunity. Just make sure you raid enough money for the rehab project. don't under estimate the costs and pad for surprises (trust me there WILL be surprises) 

You should also budget for the  duration of which it'll take to rehab and rent those units. 

You would probably need to evict some of the existing tenants if management is as bad as you say. 

interesting to see how the responses are split down the middle between RUN and IT CAN BE A GREAT DEAL. 

bottom line, without forming one of the above opinions, the answer is you can do it by researching the area and assuming the worst. 

If everyone in the area get $500-$600 per month for a one bedroom, assume $450-$500. If everyone in the area are ABP, assume you'll have to be as well. If everyone have lease incentives, you would have to offer those too (you get the idea).

It's never about the numbers the seller gives you. It's about YOUR research. 

Yes, it's a nice reference and the lenders don't like the shoebox sellers but at the end of the day, you should be building your financial underwriting based on facts and not someone else's numbers. 

what do you call "low income"?

Is it a class C low income blue collar or. Class D (a.k.a. War zone)?

Why is it only 50% occupied?

I'm going to put aside the possibility of 8 cap B class and just try to address your question.

The key to answer your question is not financial. It's goal oriented. 

What is your goal in this investment? Wealth building? wealth preservation? cashflow?

Getting a MF property will mean more involvement (unless you join as a passive investor), more headaches and more susceptibility to markets cycle (for better or worse). It also means, for the most part, you can always find renters and buyers for the property.

Getting a NNN could mean cruise control for 10/15/25 years but then you could find yourself someday with a specialized asset an no tenant for a while. Ever seen a former location of a Walmart? That's a hard property to find a tenant for.

There are ways to mitigate both strategies. As @Joel Owens said, you haven't to compare the actual deals to make an informed decision. This has to be beyond the hypothetical discussion of A vs. B

dollar for dollar, B class will be easier with better quality tenants and less turnovers. 

In general, both B & C class properties enjoy being in the middle tier so when markets are doing better, D push up to C and C push up to B and when markets are doing bad, A push down to B and B push down to C.

Either way, they are not really comparable for underwriting purposes. 

By the way, I assume you mean area class and not property class. If you have a C class building in a B class area, you can evaluate it as a potential B property given you rehab it accordingly. 

did you try reading the BP book: The Book on Investing in Real Estate with No (and Low) Money Down.

It has some good options for you there. 

You might save costs on the short term but fixing and replacing could cost you more in the long run.

If anything, we've seen a trend in the DFW area of moving to the 6mm planks.

I guess it's all about durability. 

@Mike Evans please don't see our comments as discouraging. It doesn't mean you shouldn't get the deal it just means you need to make the right offer and walk into the deal (this or otherwise) with eyes wide open. 

 @Mike Evans PM is property management. I just missed that line in your post. 

As for your vacancy question, as an investor you want to make sure you will cashflow on the lean years as well. These days the entire country is pumping up rents and still have high occupancy rate. Which in turn draws more development and more units built faster than population growth. At some point supply will meet and exceed the demand. Look further back into the history of the property to get realistic vacancies. 

You're all over the place with the numbers. Stick to one unit of time. Either all the numbers are annual or monthly. Your CapEx/repairs look very small @ 2% each for a 60's property. I'd give myself a little more margin. Also make sure you get quotes for things like HOI so you will have exact numbers and not estimates. Add PM to the calculation. You might not use it but a future buyer will out that in the math. Lastly, I'd repeat what was mentioned above, it's 4 tenants to deal with for $300 or less...