Re: 12 Unit Finance Question (A Little Long) - Posted by Hugh James
Posted by Hugh James on October 22, 1998 at 07:56:27:
Thanks for asking, and (as Ross Perot would say) here’s the deal:
Purchase price $290,000. The building sold 12/96 for $350,000 and the bank that is holding it now loaned $280,000. Typical rents in this neighborhood would be $500-$550 for the 6 one bedroom units and $600-$650 for the six 2 bedroom units. Six of the units are currently vacant because the bank refused to relet them as the leases expired and tenants moved out. All of the apartments need redecorating. This would primarily be paint, carpet and flooring, perhaps a starter kitchen in a couple of them. Three or four will need new toilets and or new vanities but all the tub/showers are fine. All the tile work is good. Hallways will need to be painted. Stair carpeting may need to be replaced, and the two lobby doors need to be replaced to improve the curb appeal to renters. I know all this adds up, but there is no major rehab necessary to rent these apartments at a strong market rate.
There are two coin op washers and dryers. All of the buildings structural and mechanical components are excellent. There is no major deferred maintenance here.
Comparable sales in this area for a building this size are not easy. This is a corner building on a street with a bus stop on the corner across the street, so it is well travelled. This may be the biggest building in the neighborhood, as most of the properties here are single family homes. Here are comps within about a 4 block radius: Closed–7 units at $251K, 10 units at $375K, 6 units at $400K. Pending sales–9 units at $320K, 6 units $327K. Active listings–5 units at $264K, 8 units at $369K, 7 units at $419K and 9 units at $449K.
My appraiser ran some quick comps and threw me a ballpark (with good rents and nice apartments) figure of somewhere between $375 and $425 thousand as a reasonable appraisal when we’re done and fully rented. I’m sorry this is so long, and it’s probably more than you wanted to know. But when I know I’ve hooked a good one it just turns me on. The money is nice, but it’s the chase that gets me excited. In any event, I’ll appreciate any thoughts or advice you can offer. Many thanks.