I’m an investor helping an individual who is in default on 12 SFRs in the SF Bay area and 2 very distressed apartment complexes in Dallas, a 32 unit and a 20 unit.
Has anyone here ever done a short sale on an apartment building? Up to this point I have only focused on short sales for residential. Owner bought the 32 unit in 2004, the rent rolls & expenses were essentially falsified, he went through two property managers, kicked 20 of the 32 tenants out, spent 200K on rehab (system upgrades, all new kitchens, bathrooms and flooring) and ran out of money with 100K rehab still needed. He is 2 months late with the mortgage now.
Current income from the 12 remaining tenants is $6000. Before the 20 tenants were removed, income was $16,950. I will have rent rolls and expenses/taxes shortly. My question is how (and whether!) to structure a short sale offer on a commercial deal like this, and would this deal be attractive to an end-buyer at any price? Any and all advice appreciated!
Apartments in Dallas are very attractive. Figure out what a fair price is and it should be easy to sell. A lot of investment money goes into Texas from buyers who can’t get cash flow where they live.
Of no use to you or your friend, but to the beginners who are reading this, you must verify all figures independently before you buy. Don’t take the seller’s or the agent’s word for anything. This apartment owner got into trouble because he did not independently verify the rents or the operating expenses. You just can’t cross your fingers and hope when you are dealing in large sums of money.
By the way, many investors like to buy apartments with the units empty. They figure they are going to end up kicking out most of the inherited tenants anyway, so buying empty units saves them one step.
Having empty units won’t hurt your sale. What will hurt you bad is not having the renovations finshed.
get the current owner to give permmision to the bank to talk to you.
Find out from management co.'s the current average ocupancy rate and curent rental prices so you know what the PROBABLE monthley income should be. (last I checked dallas multi-units were dirt cheap , but they only have a 60% occupancy rate)
You could become majority partner in this buy supplying the needed capitol to finnish the rehab IF the PROBABLE rental income will be enough to support it. You have 2 very negotiable partys here. First the owner who would love to take in a partner to bale him out of his nightmare. Second the bank, if they take it back they know they will have to take a big loss so they will want someone like you to bale them out of there bad loan. If they are like most banks they won’t even relize someone has put 200k into it. You can get this building at a good discount to the sticker price PLUS 2/3 of the rehab has allready been done for you. Opportunity knocking???