Current commercial rates

[TangoWhiskey]

Hello Multifamily types

I'm working on a 3 bldg 52 apts deal, 2 X 18's and a 1 X 16.

All 3 bldgs need major renovations.

What rates would people use for underwriting as current commercial rates sub 1 mill mortgages - all 3 are separately titled, total deal price 2.05 mill.

Thanks

 

[Cory Sperle]

What province is this in? By needing major renovations I assume that all three are not performing as they should? It could be tricky to term them all out right away.

 

[Matt Crowley]

Better to do an IRR / developer-style valuation of the buildings rather than cap the income potential or current.

Look at valuation upon completion (CBRE, JLL, Colliers have cap rates for rough calcs, or ask Realtor for comps)

Developer analysis:
Value upon completion
- closing costs to sell upon completion
- costs of development
- 20% profit on development cost (toggle amount)
= maximum price you can pay for building

If you are anywhere in the ballpark, then ask your Realtor for every comp in the city (if you are in a smallish city <1.5 million) under $3 million. Look at $PSF - as you will pay a price per pound on this one if it is a dog, not a cap of income.