Opinion of typical MF offerings in my local area

[White8]

I receive multi family listings from a couple of companies regularly and have attached a typical one that I received a few days ago. This particular one is an an area that I don't like so I have no interest in it but was curious to get some opinions from the people on the site who deal in multi family.

 

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[Runum]

Apparently it's been on the market a while. It says that it's asking $50,000 per door. The current asking price calculates 37,857 per door.

I know that you don't like it but you would still have to know what the play is on the property. Are you wanting to build value or pull cashflow? Seems to me a cap rate of 5... would leave no room for value growth, if the expenses were close to correct.

 

[JesseO]

Looks like a bad deal to me unless you expect a lot of growth in the area. What is it about this deal that intrigues you? Will they take owner financing or a lower amount? How many units are actually vacant right now and each month for the last year? Where is the area headed? Would this be an ideal property to turn around?

 

[White8]

Units per acre is 35 but the property has 25 units.

I generally look for cash flow and see building value as a bonus. I also normally hold investments for a long period of time.

One problem I see is the proforma is built around a 30% down which leaves no room for any creative financing to reduce the initial investment.

 

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[White8]

This deal doesn't really intrigue me but it is typical of my area. The area is not in a real growth area, in fact this one is in a less desirable part of town.

 

[JesseO]

Well I was assuming 35 units, so that makes a little more sense. That being said, this is not a good deal. I would pass unless you can get it for more like 650k-700k. There are a LOT of things to worry about with a property this size in terms of maintenance, on site staffing (or lack thereof), landscaping, and financing in today's market. What really matters at this point is what are the vacancies for the last year, and what do you realistically think you can bring them up to? That is the question that makes or breaks you.

P.S. Less desirable part of town would mean that you don't have to worry so much about new construction and would account for the $510/month per unit average income. At 50k per unit, that would be horrible. Oregon is a different market than I am used to, but price/unit and income/unit are universal. It just doesn't match up very well if you don't count on appreciation of the property. If you want cashflow, this may make you up to $2,000 per month if it is full. Can you keep it full? Do you have a manager who can also do maintenance and keep expenses down?