All Forum Posts by: Melissa N.

Hello everyone! 

We are newbies and have been running numbers on lots of deals but they never seem to make sense (off MLS). We finally have one that my husband saw and we realllly want it to work. With that said, we don't want to overpay either (I think this is a fairly common newbie issue).

It's definetly a 'value add' since the rents are below market (by about 150) and they can use some reno. How do you guys figure out the prevailing cap rate for the area? 

What do you think of these numbers:

5 units

240 sale price

27600 annual rent

12055 in expenses (including tax, insurance, outdoor lights, property manager 8%, repairs/main. $40/door, landscaping - am I missing anything?)

At then current situation I am not sure 240 makes sense. It is in a growing city (one of the best!) and in a C class neighborhood right next to a B class neighborhood. 

Once we do some light fixing up, we will should be able to get 37500/yr in rent. I know how to do the Cap rate but not sure how to compare that to the prevailing Cap. Basically so I know if I can turn this around in say 3-5 years. Any thoughts are GREATLY appreciated. Love BP and really hope this is a good deal! 

Welcome from a fellow newbie and Charlotte investor!! 

Great advice J Beard!! We'll look at it from that prospective too.

yea we are trying to project what we could sell it for once it's in better condition. Truth be told, we are more interested in holding it. BUT my husband and I got into a debate about whether or not a 5 cap is a reasonable return for an investor. 

Perhaps  I am just over analyzing but I feel like it will be difficult to sell it, whenever we are ready, if it's only a 4 or 5 cap.

We are looking at a 10 unit building in a class A, very upscale area near a growing city. The place has a lot of work to be done (roof, parking lot pave, updating, etc).

After fixing it up we are debating what a reasonable cap rate would be. What do you think the lowest 'acceptable' cap rate is?

This would be our first multifamily and I'm having some analysis paralysis.

Thanks!

Melissa

Yes I was talking about a specific neighborhood. I love the city its in but the neighborhood has moderate crime right now. I know there is a plan to expand the streetcar service into this neighborhood so that has faired well in other areas. I guess I'll do some more digging! 

Good idea John! I'll call the building department and see what I can find out. We would certainly walk the property and check out the neighborhood if we were going to move forward. Just wondering if there were any 'tricks' to scoping out before we booked a flight. 

Good advice, thanks guys! 

I just had a realtor send me a property that on paper looks great. However, the area is historically 'rough'. She says its in transition so I'm just wondering what resources everyone uses to evaluate this kind of thing. I checked the crime sites and its the usual larceny, vandalism, etc. But I also see that in areas that I know are nice. Thoughts? 

PS We used to live in this town but have since moved away so driving by is not an option. I do have friends in the area I can ask to take a look though. 

Thanks Larry! I'll definitely check it out.

We just moved back (to the high cost area). Now we are second guessing that decision. No eawy answers. Just curious what others think.