Re: First Opportunity? Small Park - Posted by Tony-VA/NC
Posted by Tony-VA/NC on September 26, 2003 at 09:34:35:
I prefer these type of smaller deals, especially those with room for expansion.
There is no real mystery to evaluating these properties, nor is there one true price.
The first step is to confirm the exact and true operting expenses and income. (Don’t forget vacancies)
Subtract these operating expenses from the income to determine Net Operating Income (NOI).
Decide what amount of money each month you want in your pocket.
Subtract that number from the NOI.
What is left pays the debt service (build in some reserve cash as well).
The final price and terms will be determined most by how much you desire to make per unit each month and how much you are willing to pay for that right. Always start at a lower price (or better terms) and negotiate from there.
Ernest is correct, you will be the manager of these properties because they will not support a full time manager. But if you were buying 5 single family units, you would be in the same boat. Having the units all together makes maintenance far more easy to accomplish.
The expansion reality will need to be confirmed with the zoning, building, Dept of health and whatever other controlling gov’t agency dominates your area.
Again, my value is based upon the amount of effort and money it will take me to realize the income stream I desire from this property.