All Forum Posts by: Tom Lafferty

That's exactly what I did.  We sold the previous deal in February of this year.  I'd been looking for a LONG time, but this one worked out that we were under contract just a few months after selling the last one.  I'm hoping it doesn't take that long to get the next one.  I'll probably start looking in a month or so.

believe it or not, this deal was listed on loopnet, which ordinarily doesn't have much.  It was listed by one of the owners wife who is a broker.  There was no information other than a property name, a phone number, and a price.  It took four months to get it under contract, and two more to close.

@Jon Q., the management company was on board from the very beginning, and a huge part of the analysis.  The owner personally owns a similar property very nearby so is intimately familiar with the submarket.  We are also working on other deals together, so there are additional benefits to both of us.  

As far as the investors, I sure hope so too!!  They are all very educated on the investment and know all the risks.  We're projecting around 100-125% to them including annual cash flow and a capital gain at sale in 5 years.  Those are conservative numbers, and I hope to far exceed them, but obviously the economy needs to cooperate to make that happen!  

Lovely green pool against the abandoned office.  Just to the left are TWO two bedroom units, each able to bring about $850 in rent, connected to be used as the office.  We'll be rehabbing both units and leasing them (at a premium since next to the pool), and moving the office into the free standing building once renovated.  

Heres a kitchen that had a slab leak at some point.  They fixed it and turned the unit into a storage unit.  There were no less than 5 or 6 of these around the property!  

Here's a picture of some of our lovely units....This one had a fire in 2007, and has never been repaired.  Even if you figure avg rents over those 10 years at about $700, and only being occupied 90% of the time, they lost around $75,000 in income.  At the current mkt rent of $850, it would add $140,000 in value if up and running.  Unbelievable.  

@Darryl Dahlen, thanks for the offer!  We've got a great PM engaged at this time, but I'm always up for meeting a new one.  I know a lot of the C class PM's, but may not know that one.  Thanks!

If you're talking about a cap rate based on the sellers actual expenses and their actual income, then we absolutely paid too much.  That is not how properties currently trade though.  Forgive me if I'm misunderstanding your question. 

At the risk of getting blasted by the many that DO subscribe to that theory, here goes....

We have a yr one operating budget of about $425,000 and their current income is probably around $500,000. So $75k NOI at lets say a 7.5 cap is $1,000,000. No way is it going to sell for that. If I had an accurate picture of the sellers actual expenses, the NOI would be higher, as I know they weren't spending much on it, but they couldn't have been making much profit, so the cap rate would still be really low. Short answer, we bought at a price somewhere between actual value based on actual numbers and what it would be worth when run by a reasonable operator. I would have loved to pay less, but given our experience in the market, it has enough potential to hit the returns we want.

Hi @Brian Adams, I answered a text, FB post, or email recently from you.  Can't remember which and can't find it now?  Send me a message...

rents are currently about $700 for a 1/1, and $810 for a 2/2, all bills paid.  Pro forma rents are likely to be around $825 & $935, including utilities, although they'll be billed back to tenants going forward.

As far as the cap rate, I said not to ask!! Just kidding. I never got financials that I trust, so I have no idea what their expenses were. I would normally put their T12 income over our yr 1 expenses, but that would likely be a negative cap rate. I don't even know if they were making money by the time we took over. Our pro forma cap rate after stabilization is projected around 10.5?