All Forum Posts by: Nick Maugeri

Doesn't quite work like that. Appraisers will seek out other properties that are most similar - they use other sales that comp for two homes on one lot, three homes, etc. They don't say the median PPSF is $230, average home size at 1,500 SF results in value of $345K. Two homes results in $690K appraised value. They are instead going to find comps where two homes on one lot sold within a certain distance at $500K, and three homes on one lot sold for $650K, then establish an average and adjust for conditions. A glaring mistake many folks make is building an ADU and thinking that the PPSF is going to be tacked on to their home which is not the case. Rather, the appraiser will use other sales that have one home with an ADU as a comp, or JADU, etc.

Should purchase two separate lots instead of two homes on one. Two homes on one lot will not appreciate as easily/quickly as individual homes on their own lots. Also, your buyer pool is greatly lowered when you try and sell, consider carrying costs and demand versus affordability in your area at projected time of exit.

Not sure how age is relevant. I recommend doing a 1031 into a commercial property as it sounds like that's what your ultimate goal is. The answer to waiting for more appreciation versus exchanging now - exchange now, the tax benefits will outweigh the appreciation over two years unless you're expecting dramatic growth suddenly in the area. Commercial allows you to force appreciation, so run a CBA on several options and do not go turnkey - need something with a small amount of value add.

If your property is in an area the city is trying to redevelop - see if they can assist, there may be grants, etc. Otherwise, cut your losses and move on. A CBA or IRR analysis will point to this strategy as well.

@Ivette Raygoza this is a good example of what we discussed yesterday in how to build a team in various markets. Kasey's location is set to Charlotte but she is providing sub-market analytics which implies that she may operate from Charlotte to Greensboro - and several others. Much of this data is likely taken from low level news or publications, but she's compiled and presented it in a clean way without the fluff. This is what you want on your team when purchasing out of state. Note the 'diverse' rental strategies as we discussed, supplemented with growing demand and stability from education and infrastructure through the general plan. 

I don't know all of the details, but high level estimates: 

Acquisition: 

GOI: $42,060 

EGOI: Less 2.5% vacancy, $41,430

Taxes, R&M, Capex, Insurance, PM: Less 40% (est.)

NOI: $24,860

CAP: 4.3%

Existing:

GOI: $80,400

EGOI: $79,195

NOI: $47,516

CAP at 4.3%: $1.1M

The CAP in your market it not 4.3%, likely closer to 8%: Value then is ± $595K. You can confirm this based on (1) comparable sales and (2) contacting local CRE Brokers to determine market CAP for asset type. You don't use the same CAP rate, just because you purchased at a 4.3 CAP does not mean that the CAP is 4.3%.

Contact a local CRE Broker and ask them what the market CAP rate is for your asset type (MU/FLEX). You should want one on your team anyway. If you need recommendations, referrals, etc., send a DM and I'll share a few professionals who do the most volume in your market.

You need more exposure, pay a CRE Broker and they will get it Leased. Probably only cost you 1-2 months of rent on the fee and that's better than vacant units for 3-5 months. They'll also bring a better tenant than you'll find on your own.

CAP is not estimated. You just need to run comps to determine CAP for a given market. Looks like you should be around 8%. To determine your CAP, divide $50,220 by the purchase price. If your asset can be valued at an 8 CAP, current value is $627,750.

The Lease should not renew automatically for an indefinite amount of time, consult and pay commission to a CRE Broker to handle this.