- Joined
- Oct 7, 2007
- Messages
- 699
Hello fellow investors,
I am looking for some feedback on a deal that I came across on a 12 suite apartment building in Regina, SK. Here is the story and details of the deal.
I came across a 12 suite apartment building in a C area that has been condemned by the city (due to poor mgt, drugs, hookers and disrepair etc). The building has been vacant for about 6 months and the previous/current owners have "attempted" some renovations to bring it back up to city standards, but it's got a long ways to go and the owners are from "afar".
I looked at the building today and 6 of 12 suites are horrid and almost want to make you vomit at some of the things that I saw (I will spare you the details). However, it is mainly cosmetic and cleanup, and the structure of the concrete block building is excellent! The location is somewhat questionable, but the area is in a slow transition with some revitalization plans occurring within city planning.
The building consists of 12 large suites including, 4 x 2 bedroom (800 sq ft) and 8 x 1 bedroom (735 sq ft). It also has 11 parking stalls and is close to downtown Regina.
Here are the conservative numbers once the building has been "normalized":
Asking price: $595,000 ($49.6K/door)
Proposed purchase price: $480,000 ($40K/door)
Potential Revenue:
Please provide your candid thoughts and/or suggestions...thanks!
I am looking for some feedback on a deal that I came across on a 12 suite apartment building in Regina, SK. Here is the story and details of the deal.
I came across a 12 suite apartment building in a C area that has been condemned by the city (due to poor mgt, drugs, hookers and disrepair etc). The building has been vacant for about 6 months and the previous/current owners have "attempted" some renovations to bring it back up to city standards, but it's got a long ways to go and the owners are from "afar".
I looked at the building today and 6 of 12 suites are horrid and almost want to make you vomit at some of the things that I saw (I will spare you the details). However, it is mainly cosmetic and cleanup, and the structure of the concrete block building is excellent! The location is somewhat questionable, but the area is in a slow transition with some revitalization plans occurring within city planning.
The building consists of 12 large suites including, 4 x 2 bedroom (800 sq ft) and 8 x 1 bedroom (735 sq ft). It also has 11 parking stalls and is close to downtown Regina.
Here are the conservative numbers once the building has been "normalized":
Asking price: $595,000 ($49.6K/door)
Proposed purchase price: $480,000 ($40K/door)
Potential Revenue:
- 2 bedroom -> $850 x 4 = $3400/month ($40,800/yr)
- 1 bedroom -> $725 x 8 = $5800/month ($69,600/yr)
- Laundry -> $200/month ($2400)
- Total Potential Revenue -> $9400/month ($112,800/yr)
Operating Expenses:
- Property Taxes: $5745
- Prop Mgt (6%): $6408
- Insurance: $3000 (estimate)
- Utilities: $17500
- R&M ($500/unit/yr): $6000
- Garbage removal: $2000
- Misc: $5000
- Total Expenses -> $45,653
Financial Overview:
- Gross Revenue -> $112,800
- Less Vacancy (4%) -> $4512
- Net Revenue -> $108,288
- Less Operating Expenses: -> $45,653
- NOI -> $62,653
The "proposed" offer:
- $480,000 or $40K/suite
$100K down and seller will carry remaining $380K @ 4%, interest only payments of $1267/month for up to 14 months (and no payments for the first 60 days)
Seller is willing to finance during renovation stage and re-occupancy, then would obtain conventional financing via bank and CMHC, hopefully up to 80% LTV of normalized rents etc.
New boiler -> $20,000
Common areas -> $20,000
Exterior and landscaping -> $20,000
In-suite renovations ($12,500/door) -> $150,000
City permits and red tape fund -> $10,000
Contingency Fund and interest payments -> $25,000
Total upgrade budget -> $245,000
Purchase price: $480,000
Down Payment: $100,000
Renovations: $245,000
Total Cash Required: $345,000
Price In: $480,000+$245,000 = $725,000
Post renovation value @ 7 cap rate ($62,653/7%) = $895,042 ($75.6K/door)
80% financing = $716,033
Equity take out available (20%) = $179,008
Please provide your candid thoughts and/or suggestions...thanks!