What Are Some Things To Consider When Buying An Apt Building?
We are looking at purchasing a 16 unit apartment building and was wondering what are some of the things to consider?
It is currently not rented so we plan to have inspections and appraisals done of course.
Since it has not been rented in several years we are not sure how to calculate cashflow etc.
If you need to ask a question like that., this apartment is too big for a first purchase. The fact that it is vacant, means you better have your act together before you buy in this one.
That does not answer my question.
I plan to have someone qualified look everything over before deciding to accept or not but I need to know what to look at before I decide whether or not to take it to that point.
This is not a first purchase. It is the first unit that is more than a quad.
What are the comp rents in the area? then what would be your cash flow etc....[ Edited by ddipaola on Date 07/10/2007 ]
rglover is right. imagine why the last owner may have lost control. Typically the cashflows turn negative, they get tired of working for free and then they walk away and so do their tenants. We have learned that the biggest problem with these types of deals is the financing and seasoning. Citibank will loan out 1.50% over the bond 80% ltv with a 1.15 DSCR on apartments, but not unless they are 95% occupied for 2 years. You are looking at hard money loan for 18 months or a money partner. And there is always seller financing methods.
Do you have any experience with property management or construction. You will need very strong skills or partners in these areas to pull it off. Check out Dave lindahls courses.
If you are not sure how to value an apartment biulding (income method) then I suggest you study up. It will not only help you with the seller, but also negotiating financing, insurance and a property manager. Otherwise you may be taken to the cleaners.
Having said all that. As long as its not a dump or condemed, it is probably an excellent opportunity and fantastic cashflow if and when you pull it off.
Best of Luck,
all this seem so harsh for a simple what is my due diligence question?
why do I care why the last landlord took it in the rear?
What does the financing have to do w/ it?
What does renovation construction experience have to do w/ it?
Granted all these issues need to be looked at but these are only some of the basic issues that need to be addressed in all deals.
The key thing to me, is there a business model that works?
If not as a rental, maybe demo it and build homes or do a condo conversion. Is it zoned commercial and Starbucks wants it. I feel you need to look at the 10000 foot issues 1st.
all IMHO.
Quote:
On 2007-07-19 00:08, cjmazur wrote:
all this seem so harsh for a simple what is my due diligence question?
why do I care why the last landlord took it in the rear?
What does the financing have to do w/ it?
What does renovation construction experience have to do w/ it?
Granted all these issues need to be looked at but these are only some of the basic issues that need to be addressed in all deals.
The key thing to me, is there a business model that works?
If not as a rental, maybe demo it and build homes or do a condo conversion. Is it zoned commercial and Starbucks wants it. I feel you need to look at the 10000 foot issues 1st.
all IMHO.
This IS a big part of the DD. ...Obviously there is no current business model if it is vacant. ... and business models only work with skilled people. Good luck to you- exciting that you are taking action regardless!