@Joel Owens
Good points. Thanks for contributing. Just thinking out loud.
I agree with you that the comp sales vs. cash flow value doesn't make sense. Neither did investors coming in and buying up SFRs for 30k-50k after repairs that easily rent for $795-$995/month but that has been going on for several years now. Are investors paying full armchair investor pricing for investment property in your area again? I realize it is coming but it seems that good deals can still be had in Metro Atlanta without having to go into war zones. If you know where and how to look.
The bargain shopping days are over but it seems that historically commercial/multi-family lags behind residential so there may be substantial opportunity in this space. Certainly looks like it. I've talked to investors in the area that bought out of foreclosure for pennies on the dollar. They are not selling. Why should they? They are pulling out cash like an ATM machine while values catch up. So your comp sales are cash investors buying empty buildings needing repair out of foreclosure during the recession and holding for cash flow with no incentive to sell. I've seen an old pre-recession appraisal that pegs the buildings at 304k each or 2.7m for 9. Obviously the actual value is much much less at the moment but it's interesting information. Could we get back close to those numbers once the dust settles?
We need the armchair investor to come back into the market. You know - the full time doctor who is looking for long-term buy and hold rental property for tax benefits and the 30 year paydown as much as income and value.
I may need a commercial broker to get more of an idea of market value (may be some off market comps or the like) but this area was devastated by mortgage fraud during the recession. Investors are still able to pick up properties for way under cash flow value. The rental market apparently just picked up substantially a few weeks ago. Makes sense with a) employment improving and b) normal summer changeover. The phone is truly ringing off the hook with a waiting list as discussed. 105% occupancy. Rental demand in this area is through the roof since it is close to major job centers, shopping, public transportation, and colleges/tech schools. This is a transitional area for folks trying to build up their reserves now that they are back on their feet. People are in this area because they are either a) stuck at this level or b) trying to save money/rebuild credit. This is not a "destination rental" like a condo across from Piedmont Park. :-)
I have access to all of the paperwork. Been drilling down into the numbers (Trailing Twelve). The water bill is all over the place in Dekalb. They bill every two months. On one bill the monthly cost will be $100/month and on the next one $350/mo. Dekalb County apparently don't have the staff to read monthly or even bi-monthly so they "guesstimate". Average seems to be around $250/month which is already baked into the financials. I can imagine a plumbing audit and some updating to low-flow may improve these numbers but market demand supports the tenant paying some portion if not all of their portion of the water bill going forward. A typical two bedroom apt should run about $50/month for water according to a manager I spoke with at Dekalb Water. These are at $250. Hmmm.
Is the cash flow really that insane? With $2200/month gross rents what do you feel net rents should be? Doesn't $1268/mo net on $2200/mo gross seem reasonable? Say it's $1100/mo net or 50% of gross. That would put the value per building at $132,000.00 or 1.188m for nine of them.
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