Please Take A Look At This Multifamily Rehab Deal
I have the opportunity to purchase 3 duplexes
2 need a bit more than paint and carpet but are not that bad - say 25k each for rehab (very worst case scenario)
the other 1 is a half burned out shell (1 unit ok the other need to be completely rebuilt with the exception of the frame and brick veneer) - probably needs about 50k of renovation
I can get these for about 180k total from a landlord looking to get out
I also own other united in the same area with about 95% occupancy
rents are about $600 a unit per month, taxes and insurance about $2200 a year per duplex
I can put 20% down and can either use cash flow from the other properties for rehab or get a heloc on the other properties for rehab
I am in this as a cash-flow investor, but the resale of these duplexes would be about $125k each in a couple of years
I am about to pull the trigger - what do you guys think?
[ Edited by InvestorGuyTN on Date 08/02/2006 ]
2 need a bit more than paint and carpet but are not that bad - say 25k each for rehab (very worst case scenario)
the other 1 is a half burned out shell (1 unit ok the other need to be completely rebuilt with the exception of the frame and brick veneer) - probably needs about 50k of renovation
I can get these for about 180k total from a landlord looking to get out
I also own other united in the same area with about 95% occupancy
rents are about $600 a unit per month, taxes and insurance about $2200 a year per duplex
I can put 20% down and can either use cash flow from the other properties for rehab or get a heloc on the other properties for rehab
I am in this as a cash-flow investor, but the resale of these duplexes would be about $125k each in a couple of years
I am about to pull the trigger - what do you guys think?
[ Edited by InvestorGuyTN on Date 08/02/2006 ]
Comments(0)
If these duplexes are each on there own tax parcels they could be financed at 100% except the burnt out one which is a different story. If you have 20% for a down payment I would use that money for the remodels.
Good Luck,
Robert
[addsig]
The investor should give you guidance in how they want the legal structure set up before they invest.
You will want the rent rolls, income and expense statements, 3 yrs tax returns from the sellers, yr to date P & L from seller, ect to evaluate property.
you may need experienced managers, differed maintance expenses, all things to look at before deciding to purchase.
Good Luck,
Robert
[addsig]
You may be fully aware of this... but just in case you are not...
The markets across the nation are quite efficient. (I buy office & retail nationwide $5m+). The higher the cap rate the higher the market vacancy or anticipated future vacancy. Or the older the property with higher capital expenditures required (below NOI expenses). However, I would confidently speculate that all-in-all the smaller, less popular markets would offer higher cap rates because of less competing buyers. But, this may be somewhat offset by less sophisticated buyers over-paying on smaller mult-family projects.
Right now my favorite State is Georgia for cap rates relative to risk.
How do I calculate the CAP%?
Whups Cap Rate = NOI / Asking Price (or Sales Price)* 100
Bryan[ Edited by lavelle on Date 08/10/2006 ]
Private banks/ lenders do these types of deals. Most of the time the equity in the deal is just as important as your credit. Cash flow helps as well. A lot of the lenders I work with place a cap on these 2nds, but have favorable terms.