Would you buy it? Deal or no deal?

[joannesreidealboard]

Should You Buy This Commercial Real Estate Property???

I would like to know if this is a property that you should purchase… Let me know at the right … Send Me your Comments.

You have been looking and find an apartment property that financially looks very good. It appears to cash flow and there is management in place. As you do an exterior inspection it is in good shape on the outside. There are a total of 72 units.

Upon taking a closer look at the properties interior it is not as good as the exterior. The exterior is a 7 and the interior is a 4 (on a scale of 1 - 10).

Having an idea of how the property condition is you look at the rents. You believe, after some research, that you can get an additional $30 - $40 per unit per month rent. You have determined that this IS acheivable.

The last thing you check is the current tenant mix. The current tenant mix turns out to be lower income AND you also have a problem with collections. You find out that about 30% of the rent remains uncollected and is late from the existing tenants for that month. Management assures you that they are on top of it. You also notice that the average deposit on file for each tenant is $99. The average rent per unit is $500.
Bottom line is even in its existing ALL AROUND condition the numbers make sense and it looks as if they can only get better.

Bottom line is the financials appear to tell you that you have a winner and the condition of the property is probably Good even though you know you have some work ahead of you. Plus, there is the ability to raise rents.

My question is based on what I have just told you should you buy this property or not? If so, what is the ONE thing that you must do BEFORE you buy the property? Please let me know your thoughts. I look forward to your answer…

[reiclub]

I am curious if you live in this area and understand this complex and who rents from it. Is it a warzone? Warzone or not if the numbers are right I will buy and turn it over. It just may take a year or two to get it into shape. Definitely fire that management company.

If you don’t know the area real well, I would talk to “like” apartment complex owners and ask if they feel this is a typical scenario or if they are doing better with their collections and deposits. I am wondering why on earth someone would do this $99 deposit. It appears they were desperately trying to keep the place full which is in indicator that it is a highly undesirable place to live and that there is some gang activity or drug use going on. If you buy you should consider less income for a while during your evictions of the culprits. I would also change the name of the complex and do something on the outside to indicate it is a different place. An old name will stick in peoples mind as an undesirable place to live for a long time. You will basically need to rebrand it.