I have four Quads the bank & I own in Newnan, Ga. I bought them 15 years ago to pay for kids college education. I have the equity (paid by the tenents, thank you) needed and then a bunch, I think. Each building rents for $2200 per month. Taxes and inurance is $200 per month per building and trash removal is $275 per month for all 4 buildings. All four properties are in good condition, nothing major needed, 100% occupied and I’ve never spent a dime on advertising. I’ve taken care of them and people want to live in my buildings. Occupancy has always been in the high 90’s.
All units are very generic, identical floor plans, no diswasher or washed dryer hookups.
What is the right price for me to ask for each building?
there’s a few ways you can put value on the property, one is to just find typical comps on Quads in your area, and sell it for what other quads are selling for. Or take your Net Operating Income and divide it by 8-10%, and you’ll get a good ballpark figure for what most investors would pay for the property.
On each building I net $20,000. I am thinking my bottom line is $215,000 for each building. Does that seem fair?
Comparables are difficult to find, there are 10 quads on the street and none have sold since I bought mine 15 years ago. Talked to a realtor and people just don’t turn them loose in this town very often.
Each apartment is metered for water and electric, so there is very little cost to operating these buildings.
Maybe he wants to 1031 exchange into a bigger property? Maybe he wants that shiny new Lamborghini Gallardo LP560-4? haha, or maybe just wants to walk around with big wads of cash in his pockets and strut around downtown.
haha… believe me, I’ve considered all the above long and hard…
I’ve bought a little place “down by the river”, and would rather hang there on the sandbar with beer and bikini’s then worry about 16 apartments. 15 years is long enough, objective met, tme to move on…
The kids have their college diploma’s paid for by this investment and they are not interested managing rental property… I have a nice pension coming from 25 years on a W2, plus a 401K, and my play money earned here…
If these buildings are so desirable I would get on the phone with all the other owners on your street and start taking offers. Think Monopoly. You can’t price this property thinking like a buyer, you have to price it thinking like a seller that wants an ignorant buyer to pay too much for it. I’m not saying be dishonest or misleading, but you want to find buyers that have some wealth and just want to collect more properties or buyers that neglect the details and believe the buildings will cash flow at a higher price. Sounds like you should accept nothing less than full market value for the properties. Potential buyers probably won’t net the same return as you currently do so take that into consideration…
Granted I’m not in the same geographic region as you, but where I’m from, $50K/unit is kind of the break even point. When I see people price their average 4u buildings at $300K and up I think they’re nuts! From what you described of your buildings, $215K sounds like a great asking price to me, plus that extra $15K above the $50K/unit mark gives you a little negotiating room.
Do the buildings have any mortgages left on them? You could always offer owner financing for them and just sit back and collect the check from the buyer(s) each month. Also, you could then ask for a higher price if you’re offering the seller financing. Just something to think about. Especially now since a lot of investors are having a tough time getting financed…
Price your property at a 8% cap rate (capitalization rate) expecting a 10% cap. Keep your expenses down to the basics not including things like your vehicle, home office, etc. Let the buyer nickle and dime you on that stuff. What they don’t consider will be your gain. Banks typically wouldn’t even make a loan on a multifamily property on something that doesn’t have at least a 8-10% cap so this needs to be the range for you to be in.
Keep your expenses down from now until the sale on repairs. Get the rents up to the highest possible. Get every penny you can out of the places right now to make the books look good. Negotiate with your Realtor on their commission.
When buying I use a formula of rent times 30 minus repairs and costs of splitting utilities if necessary. That turns out to be in the 18-20% cap rate which is basically a highly distressed sale.