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REAL ESTATE Rate This Deal (1) - 8 Unit Apartment Complex

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GetRichODT

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Asking Price $1.5M

Year Built - 1983 Ft Worth, Tx

Gross Income - $93,360

Expenses - $26,285

Net Income - $62,360

Insurance - $4,715

Gross Income Multiplier - 16.07

Cap Rate - 4.16%

Each unit is 2 BA / 2 BR

Average Lease Rate - $1,000 (I believe this can be raised a little bit)

I think he's too high, but at what price for you would this deal become compelling?
 

Chimp

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I doubt you can even afford this home because if you could you wouldn't be asking here and if thats so you're just dreaming which is a waste of time. If anything at least put all your "rate this deal" posts in one thread instead of spamming the forum.
 

GetRichODT

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I doubt you can even afford this home because if you could you wouldn't be asking here and if thats so you're just dreaming which is a waste of time. If anything at least put all your "rate this deal" posts in one thread instead of spamming the forum.

Da fvk is this? lmao. weird. Glad you "doubt i can even afford this home" when 1) it's an apartment complex and 2) what are you basing that on?

It's a message board. People post questions. Quit spamming my thread with your worthless response.

Any other responses are welcome. I can easily fund this prospect, but new to apartment complex acquisitions as my portfolio thus far is comprised of SFH and town home / duplexes.
 

Runum

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To me, there are too many variables that are not specified by you for anyone to answer your question intelligently. You aren't even telling us how many units, typical neighborhood vacancy rates, etc. (edit- I see 8 units in title)

$187,000 per door?!

I have been around Ft Worth for about 50 years. Some parts are always growing and some parts are past their prime. 7th street used to be a ghost town and now it's the place to be. If you bought when it was a ghost town and sold now you would kill it. If you bought now you would be over paying.

Neighborhood, demand, competition, employment trends, road construction, retail development, overcrowding, etc have an affect on the value of the property now and in the future. You need to camp out in the area and know what the city has planned for the neighborhood. Who is buying, who is selling, who is hiring, who is laying off.

If you want a better answer post better information.

Good luck
 
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Scot

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I doubt you can even afford this home because if you could you wouldn't be asking here and if thats so you're just dreaming which is a waste of time. If anything at least put all your "rate this deal" posts in one thread instead of spamming the forum.

95% of RE investors cannot afford the properties they buy. That's how real estate investing works. That's the beauty of financing and amortization.


@GetRichODT The price is way to high if you're looking solely at rental income. I wouldn't even consider it until is was a 7-8% Cap. That being said, I agree with @Runum, Way to many variables here. This could be a property that with $20,000 of rehab could resell for an extra $200k. But honestly, questions like this are better suited for BiggerPockets.com
 

RHL

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I'm puzzled: How do you get to the point where you know what a cap rate is, but at the same time, don't know that a 4% cap rate (on a complex, no less) is really bad? I've never done RE in my life and I know that.

I'd plunk your down payment in a fund or a CD and spend some time on BiggerPockets. You're going to lose your shirt if you go into this without more education.
 

Major

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Asking Price $1.5M

Year Built - 1983 Ft Worth, Tx

Gross Income - $93,360

Expenses - $26,285

Net Income - $62,360

Insurance - $4,715

Gross Income Multiplier - 16.07

Cap Rate - 4.16%

Each unit is 2 BA / 2 BR

Average Lease Rate - $1,000 (I believe this can be raised a little bit)

I think he's too high, but at what price for you would this deal become compelling?



I would say this property is priced to high. What is your goal? I would hope you one goal is to get your original investment back as soon as possible. This would enable you to take your initial investment and spread it out over the purchase of other properties while rates are low and banks are aggressively lending with favorable LTV's. If your cash on cash return is less than 25% you are taking a risk of leaving money on the table as the market can drastically change within 4-5 years as you may need to be able to exit quickly. Also, sounds like there is no real valued added component to this property. Meaning no chance for increase of rents or state/local subsidies (like tax) therefore increasing your cashflow and equity.

Also, you need to consider your debt coverage ratio. On a rough calculation with the number you have the DCR would be just above 1.47. Banks are looking for a min of 1.4 in my markets. This in turn could lead to higher rates and not favorable LTV or short balloon period because, as mentioned, there is potentially not upside therefore making this a riskier investment for the bank based to the income to cover its lending position.

There are plenty of other properties out there. Time is the biggest price slasher. I have two quads under contract now in Richmond, VA and am most likely going to assign them to someone as I have too many things coming to closing. If you are interested sent me a private message.

I wish you the best. One of the best things I have learned is not purchase a property you can not exit quickly from in a time of need.
 

SteveO

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I wouldn't even consider it until is was a 7-8% Cap.
I feel that this is the biggest reason that people struggle in real estate.

This property is not a good deal based on the stated information but there is much that has not been said. Cap rates are extremely distorted in almost all situations. Income and expenses are easily manipulated on paper and difficult to disprove without strong market knowledge. I used my own models for income and expenses while ignoring the lies put forth.

Here is the kicker.... I made more money from ZERO or negative cap rate deals than from positive ones. It takes experience to make this happen though. 14 out of 15 of the commercial deals I made in the past 9 years were less than 1 caps at the time of purchase.
 

Scot

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I feel that this is the biggest reason that people struggle in real estate.

This property is not a good deal based on the stated information but there is much that has not been said. Cap rates are extremely distorted in almost all situations. Income and expenses are easily manipulated on paper and difficult to disprove without strong market knowledge. I used my own models for income and expenses while ignoring the lies put forth.

Here is the kicker.... I made more money from ZERO or negative cap rate deals than from positive ones. It takes experience to make this happen though. 14 out of 15 of the commercial deals I made in the past 9 years were less than 1 caps at the time of purchase.


That's a really good point. The problem here though is there's so little info. Out the outside it looks like a bad deal. But this could be an awesome deal for reasons not easily seen in the numbers.
 

458

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Asking Price $1.5M

Year Built - 1983 Ft Worth, Tx

Gross Income - $93,360

Expenses - $26,285

Net Income - $62,360

Insurance - $4,715

Gross Income Multiplier - 16.07

Cap Rate - 4.16%

Each unit is 2 BA / 2 BR

Average Lease Rate - $1,000 (I believe this can be raised a little bit)

I think he's too high, but at what price for you would this deal become compelling?
Lol
 

Action Mike

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Real estate is local but in my area that would be a very bad deal. I don't have any large unit buildings but I don't see how you could cash flow with that unless there are some serious value add opportunities you can make happen. One thing I love about apartments is if you buy right there are a lot of ways to greatly increase the income and value of the building.

BP is a great site for Real Estate :)

I have heard several suggestions of books by David Lindahl for apartment investing.

One thing you DO NOT want to do with any Real Estate investing is buy wrong.
 

SteveO

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That's a really good point. The problem here though is there's so little info. Out the outside it looks like a bad deal. But this could be an awesome deal for reasons not easily seen in the numbers.
I was not in disagreement with the fact that this was not a good deal. I only commented on the cap rate portion of your post.

This deal is like the hot potato. Someone will be "it" when the music stops.
 

SteveO

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Real estate is local but in my area that would be a very bad deal. I don't have any large unit buildings but I don't see how you could cash flow with that unless there are some serious value add opportunities you can make happen. One thing I love about apartments is if you buy right there are a lot of ways to greatly increase the income and value of the building.

BP is a great site for Real Estate :)

I have heard several suggestions of books by David Lindahl for apartment investing.

One thing you DO NOT want to do with any Real Estate investing is buy wrong.
BP is a great site. The problem is that the great information is totally mixed in with the massive amount of crap information.

You are correct with the "buy right" comment. It is tough to do that in this environment.
 

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