Is This A Good Deal To Try And Sell?
I don't know if this property is sellable or not. The property is a 75,000 sqft building 100 beds, 60 baths and has been vacant since the 1980's. The building used to be a county orphanage and is the largest building in the county. The city and county however are very small, population at 32,000 or so, but is located 5 minutes away from a recognized university so would be a great location for apartments for college students. The building needs total rehab on the inside (it's a mess). The owner wants $2.25million for the building and claims it needs $350-$500K repair costs. Comps in the area put the ARV at $10million. Would this be attractive to an investor? I'm trying to decide whether or not to help this owner find a buyer for a fee. Is it worth the time?
The key here is how did you come up with the ARV of $10 million when you say this is the largest building in the county? The first thing to do is figure out the ARV and if the deal is how you say then you will have no problem finding a buyer.
However, you must be a real estate agent to collect a fee for helping the owner find a buyer.
What you should do is lock the property up under contract with 6 months to close. Then start immediately marketing the property. You can double close when you find a buyer.
GOOD LUCK
In my opinion this is a very tough deal based on the little bit of information we have so far. Its fairly clear to me that if there were a ready market for this space somebody would have found it and exploited it in the last 20 years. Which makes what you've got here pretty much of a white elephant.
But its not priced like a white elephant. Lets say you took the 60 baths as a standard and converted it to 60 apartments (40 one-bedrooms, 20 studios). I'm not saying you could actually do that-- only using it for a rough-and-ready calculation method. The asking price is $37,000 per unit which is, I suspect without knowing your market, _way_ too much to pay for a shell.
Likewise if you just divide the asking price by the 75,000 square feet you get $32 per foot. I think the $6.50 per foot renovation estimate is light on a building thats been vacant for 20 years. Figure closer to $20 per foot (even that is on the light side, depending on whether the building's been heated all this time which I doubt, and whether it is possible to find a use that doesn't require a complete gut-- which I also doubt). So that brings you in at $50 to $65 per foot total acquistion and renovation which is at least approaching the cost of a new building.
Is there a lot of land that comes with this deal?
As to the nearby presence of the college. Have you called their student housing office to see if there is any shortage of housing in the area, according to their opinion? Its a fairly easy call to make and might net a lot of information.But this is just as likely to cut against you as in your favor.
That said the re-deployment of an existing obsolete building can be very profitable if you can figure out a use that makes sense in your market (this is pretty much what I do for a living).
I'd start out figuring out what the land would be worth without a building and how much it would cost to tear the building down. The net of those numbers is what the property is worth today. Anything you can make happen on top of that should be yours to keep for figuring this puppy out.
The current owner is going to say that the property is worth a lot more than that but the bottom line is he's had 20 years to figure out a use for it that would make that statement true and he has failed to do so.