Determing Value On A Property W/ No Income
I am looking at a 7 plex that is a nightly rental in a vacation town. There is a long story behind it, but in a nutshell the property is vacant due to the sellers have a falling out with their property mgr. They are asking $335k and almost all numbers are unknown or are being presented in a spreadsheet (easily doctored) format. I believe that I can get 5 of these cabins to perform at a minimum of 35% occupancy at $85/night and the other two would be $50/night at unknown occupancy. How do I determine the value of these cabins?
a conservative way would be to value them at 0.
Look for cash flows froms similar properties.
Look at an as is value, v.s rent stabailized value,
Is nightly rental the highest and best use?
If an REO has been on the market for a year, the bank should be ready to give it away, just to get it off their books...
Chris
yveskleinsky
How long have the cabins been empty?
I see the same issue arising around here in Branson, MO. You should ask for there most recent 2 or 3 years of IRS Sch C and other tax documents, as-well-as the documented expenses that relate to the property and where actually used to establish taxable income.
Just another line of thought,
Jim
"If an REO has been on the market for a year, the bank should be ready to give it away, just to get it off their books... Chris "
Not to steal the post, but wanted to ask, arent most banks not selling well after a year. heard about an autcion in stockton ca where 2 of the 100 or so sold, both at 50% but the rest were not sold do to no opening bids. Are you having luck with certain banks?
When buying a property, you need to do several things. 1) make sure your title is correct 2) do a complete physical inspection including mold, electrical wiring, make sure you have enough power to the building, separate meters for electric, water, etc., adequate parking.
3) do a proforma that shows what the units will rent for, supported by rent comparables. Verify what the new expenses will be after you purchase and after it the rents are stabilized. Prepare a complete budget for the renovation. Add the cost of purchase, the cost of renovation and the cost of carry until such time you project when the project is stabilized. Next with your market knowledge value your stream of income. If the value, exceeds your cost, you have created equity. But more important is what the cash flow will be when stabilized. When it is stabilized you should be able to refinance it and pull your money out.
Go to the city and see what is happening with those other properties that may be developed. It sounds like you picked an area of change/growth.
Sounds like a GREAT area.
I look at an as-is vs. as rennovated value.
8-units sounds nice.
Do you have an estimate for the rehab
does that pencil w/ He countered @ $275 with a large 40% seller second.
Are adjacent parcels available for expansion?
most commercial brokerages have a practice specializing in MF.
Any interest in Danville, VA?
Quote:
On 2007-08-25 14:25, ceinvests wrote:
Any interest in Danville, VA?
my mother lives there. so you have mutli-family house down there?
I am in the Memphis area. Where are you looking?
What about doing a direct mail campaign to owners of multifamily properties? Apt. buildings that are less than 50 units will be more likely to not be professionally managed. Cross reference that list of owners with records for evictions, and you may have a good list of potentially burned out owners who are motivated to sell. If you can find an efficient way to make this list, it seems like it has potential.
Anyone try something like this?
In a paragraph...
A land contract or "contract for deed" (the terms seem to be used interchangably here in Michigan) is an agreement where a buyer- generally in exchange for a down payment, a number of monthly payments, and a balloon payment- gets immediate possession of a property and after making all of the agreed upon payments is delivered a deed to the property. It is a form of owner financing that is similar to a purchase money mortgage, but the owner retains the deed until the property is paid for in the theory that this makes reposessing the property easier in the event of default.
Chris