Ed, thanks for your post, you give me confidence! It is just like all the people here say, educate yourself before you do a deal, so that is what I have been trying to do over the last few weeks. I am at the point where I can scan the financials for an apartment building and see the fluff and also what has been left out. One 28 unit complex I looked at today had added in $10,800 a year in extra income to the gross rents. I asked what that was for and the real estate guy said that it was the full amount of the security deposits ($300) for the expected vacancies. He said that the ‘quality’ of tenants they had meant that they always left the apartments in a mess and were not entitled to their deposit back. I said no thanks, not the right place for me. After all, in addition to that not being what I consider income, that would reflect a 120% turnaround of tenants over a year wouldn’t it?
I look forward to meeting you and everyone else at the conference. I expect that I will have to remodel my brain in order to fit all that I learn in!
Posted by Ed Garcia on February 09, 2000 at 16:27:02:
Leslie:
As a rule, you don’t need a business plan to purchase apartments, unless
they are a fix up, none income producing property.
There are steps I could give you when purchasing a property of this sort.
But since your question is in reference to a business plan, then I will help
you find out about a business plan.
I would love to hear the steps involved. I am currently researching some multi-unit deals and plan to make some creative offers to reduce cash outlay and increase the CAP and lower the GRM. Any advice you can give on buying larger multiple units would be appreciated. Specifically, I am researching a 24 unit, a 80 unit and a 100 unit. All of the owners will take back a second and the current mortgages are possibly assumable with a 1% transfer fee. I am looking at current CAP rates of 9.5% and want to push them up to 10.5 or 11%. All of the buildings were built in the late 1980’s and are located in a market with an average vacancy rate of 6% over the last 5 years (there are a high percentage of military families located in the immediate vicinity).
Posted by Ed Garcia on February 09, 2000 at 20:07:35:
Sally,
I like your post. Although I’m not sure if I would be as much of a help to
you, as I would have been for Leslie.
I felt that because Leslie was asking for a business plan which is usually not
essential in doing multiple units. She is obviously just learning the business.
In your case, I can tell by the language you are using in your posting, that you
know what you’re doing. I was simply going to explain to Leslie how to figure
out an NOI and a few steps on how to approach an acquisition of this type.
Just some basic property analysis.
In reading your post, I can tell you have a feel for what you are doing.
If you have any specific information you would like to know, or a specific
problem you would like to solve, or would just like a second opinion.
You can find me right here, or call me at (909) 944-0199.