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 ]

Comments(7)

  • roberth3rd August, 2006

    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]

  • roberth8th August, 2006

    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]

  • haxton12nd August, 2006

    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.

  • haxton12nd August, 2006

    Right now my favorite State is Georgia for cap rates relative to risk.

  • rjsjt8th August, 2006

    How do I calculate the CAP%?

  • lavelle10th August, 2006

    Whups Cap Rate = NOI / Asking Price (or Sales Price)* 100

    Bryan[ Edited by lavelle on Date 08/10/2006 ]

  • WRIII17th August, 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.

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