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All Forum Posts by: Phil Ostrowski

Phil Ostrowski has started 1 posts and replied 2 times.

John,

We do our best to target the exit strategy before we acquire anything...a wholesale deal, fix & flip, buy/hold, etc. In this case, we looked at various exit strategies of perhaps later selling off each unit 1 by 1, or...from a sheer cap rate perspective on what the portfolio brings in monthly we could sell the portfolio as a whole later on down the road. However, various buyers could come along and have different perspectives on a value-approach to the portfolio via MAO (ARV minus rehab) or base the value on just the annual 20% return on investment...CoC approach, etc.

We don't want to assume every buyer that looks at this portfolio a year from now will take approach a/b/c, etc...to arrive at a value of what it's worth.  If we assume incorrectly based on incorrect value attributed from the start, we're essentially eliminating those potential buyers in the future, hence cutting out exit strategies due to a buyer's thoughts of "the portfolio isn't worth the asking price."

Definitely NOT wanting to complicate things, yet at the same time we can exit in a variety of ways as long as our initial valuation of the portfolio was correctly executed from day 1.

Biggerpocketers,

There is an opportunity to purchase 25 units for just under $1M. It is a mix of 14 multifamily units consisting of 2x duplexes and 2x 5-units, plus an additional 11 SFRs in various towns on the east coast, all assets within 25 miles of each other +/-. A few units need light rehab and are vacant.  As-is cap is at 15%. Once rehabbed, the 5 vacant units will bring this up to pro-forma 25% cap rate based on the above purchase price. No liens on any of the assets, owned free & clear.  

Question being...for an offer to the highly motivated seller and to attribute a value to the 12 SFR's in the portfolio, is the MAO approach used for the 12 SFRs...and cap rate for the multi units?  To bring in 25% annually overall regarding the income of all units would be attractive for sure, stable rents, long-term leases in place.

Even at market cap, the portfolio could be worth $2M+ based on NOI, etc....but...the SFRs in the mix create complexity in coming up with a purchase offer. We have one in mind, seller has already agreed, can easily go to contract now on it. Split the SFR's into a MAO scenario and the multi units into a 2nd scenario...2 offer contracts?

Any/all thoughts are welcome, feel free to reach out or comment here.  If we take it down, we're open to an equity-share for investors that assist in the acquisition.

-Phil

Ingen