9 duplexes for $550K - Posted by MaxC

Posted by Don McClain on August 17, 2005 at 15:01:59:

You need to know these things to assess the deal. Let me know if we can be of assistance.

9 duplexes for $550K - Posted by MaxC

Posted by MaxC on August 17, 2005 at 12:12:25:

How does this look?

9 duplexes (18 units)
Average unit rent = $475
All units 3/1, brick
90% leased
30 minutes from Dallas


Re: 9 duplexes for $550K - Posted by N

Posted by N on August 24, 2005 at 17:38:55:

475 /month for 3 beds is very low rent, I’m in dallas, my 1 bed 1 bath ones rent for 400/month tenant pay utilities with below market rent… where’s your property located? sounds pretty pricy to me if 3/1 only get 475, might be in a bad neighbhorhood? or may be it was very low rents… but 550K for 18 units doesn’t sound like a good deal in Dallas.


Details - Posted by MaxC

Posted by MaxC on August 18, 2005 at 10:43:02:

$62,000 gross income, $45,000 net. Owner finance with 10% down, 8% for up to 30 yr term. Occupancy was 60%, but they have leased it up to 90%. 2 units are vacant now.

Re: 9 duplexes for $550K - Posted by Don McClain

Posted by Don McClain on August 17, 2005 at 13:50:33:

What are the expenses? What is the net cash flow?

Re: Details - Posted by Jimmy

Posted by Jimmy on August 18, 2005 at 11:54:49:

Gross Scheduled Renst would be $102,600, assuming the units are all rentable at $475.

if actual collections last year were $62,000, the collection rate was 60.4%. That is terrible. and the newt of 45K on 62K gross is probably a LIE. That suggests a 27.5% expense load. Brand new construction rentals have higher loads than that.

Find out why the vacancy was so high and/or the collections were so low.

The problems that caused this MAY STILL EXIST. If I owned this dog, I would do anything i could to get it rented up , and then UNLOAD it as quickly as I could while the ccupancy was high.

Do not take the realtor’s word for why the operations were so bad last year. He or she will spin in manner that is most favorable for the seller.

Do some homework and see for yourself.

Feel free to contact me privately. I do a lot of deals like this one in east Texas.

James M. Floyd
T-Bone Properties, LP
(512) 351-9649

Re: 9 duplexes for $550K - Posted by MaxC

Posted by MaxC on August 17, 2005 at 14:58:56:

Good questions, which I’ve asked the agent, but haven’t heard back yet.

Re: 9 duplexes for $550K - Posted by Jimmy

Posted by Jimmy on August 18, 2005 at 07:37:53:

Where are the properties? If the 30 minutes is toward Longview, the pricing may be too high. The asking price here looks pretty typical for the region. But here’s the deal. at $475 a unit for 3 bedrooms, these must be sitting in a pretty rough area, or a rural area. Look carefully at other properties in the area which have changed hands lately. Get real comps. You could be overpaying.

Here are some things to consider:

  1. are all utilities separately metered and paid by the tenants.

  2. Take a look at the operating budget from the seller for 2003 and 2004. But if the expense ratio (for everyting except interest) is less than 35% of the gross rents collected, use 35% as a minimum. and the older the properties, the worse the neighborhood, the higher the expense load you should use to evaluate.

  3. Get an insurance quote and use it. the seller’s number will probably be too low. Also, assume the properties will be reasessed pretty close to what you will be paying. This is a certainly if you are talking about Gregg County. But all of the counties in TX are being queezed by budgetary issues, and are aggressively reassessing properties. Use the higher tax number.

  4. Where does the 90% occupancy come from? a seller representation? See if the seller will give you a copy of their tax return for thiese properties. Probably will not. But if you want to see the truth about their vacancy/occupancy, see what they tel the IRS. You may find that their actual collections are lower than a 90% occupancy rate would suggest. Review the leases, and see if any tenants entered in the past 2 years. then see when the prior tenant left. This will give you an idea of turnaround time.

  5. East TX (Longview, Tyler, Nacogdoches and area) is having a regional vacancy bug right now. I have been bitten in all of these places. But my understanding is that Dallas has record high occupancy rates now. Look around the area. Do other landlords have a lot of for rent signs out? Are they offering no deposit move-ins? free rent?

  6. Why are the rents for these 3 bedrooms only $475. I get $600 to $750 for my 3 bedrooms in East TX. Maybe the units are under-rented. if so, this is a good thing. or maybe the properties are run-down or situated in an undesirable place. hard to know.

good luck.