Dilemma Regarding 20-Plex

[Nir]

Hi All,

I have a difficult dilemma regarding a 20-Plex I viewed.

Numbers are good. However, property is:

- Almost 90 years old. (in good condition relative to its age though)
- Only 5 parking spots. (zero vacancy though which is good. most tenants either retired or have low income hence no car)
- Flat roof 25 yrs old close to end of its life. (expensive but I plan to negotiate the price accordingly or prepare an amendment so not a deal breaker)
- There is a pressure crack near corner of last floor. was explained to me building settled and this is very common and normal for a building that age.

Assuming numbers are great (good CAP Rate, tenants pay hydro) and location is good, would you skip this property due to any of the above or would you put an offer subject to satsifactory fianncing and home inspection?

THANKS,
Neil

 

[tahani]

Hello Neil. I would for sure put an offer conditional on Financing, inspection, checking with city bylaws re parking situation, Fire inspection and anything you need to do to satisfy your self with all of the above.
Only then you can make a better decision, one where you have facts and figures to look at.

good luck

 

[Nir]

QUOTE (tahani @ Mar 16 2010, 04:04 PM) Hello Neil. I would for sure put an offer conditional on Financing, inspection, checking with city bylaws re parking situation, Fire inspection and anything you need to do to satisfy your self with all of the above.
Only then you can make a better decision, one where you have facts and figures to look at.

good luck

Thank you Tahani,

so the age - almost 90!, wouldn`t bother you? as long as inspection report/condition is okay age is not as an issue. interesting.

Regards

 

[housedoc]

You think 90 is old?
Older buildings have their issues.
If your #`s work while accounting for them, why not?
Maybe less competition if it`s superficially seen as a money pit.

 

[OlegP]

Neil,

I recently read Thomas Beyer`s reply to somebody with a similar question. He said something along the lines of "have you been to Rome or Athens?". In other words, age of the building by itself does not mean much. The roof is old and will need replacing. What a about the boiler/furnace, plumbing, windows? As long as the vital systems have been updated, the brick will be there 200 years from now too.

 

[Thomas Beyer]

QUOTE (investmart @ Mar 16 2010, 03:29 PM) ...

Assuming numbers are great (good CAP Rate, tenants pay hydro) and location is good, would you skip this property due to any of the above or would you put an offer subject to satsifactory fianncing and home inspection?
Any buildings you buy has issues. Some very minor .. some very major. Adjust the price accordingly .. after a thorough due diligence.

$1 may be overpriced for some assets due to the severity of issues.

CAP rate and CRAP rate are close relatives ! Ensure hat the deal makes sense if you have to spend major $s on structural, boiler or roof issues .. and keep in mind that these cash investments cannot be financed usually .. so ask the seller to give you a VTB until you can re-finance once issues are fixed.

 

[Nir]

Great info, thanks everyone.
seller mentioned there will be no VTB and no 2nd mortgage. plus 1st mortgage must be assumed. not sure if this is just a negotiation tactic OR a real definite condition/requirement(?) well I guess one way to find out is to put an offer. just not that familiar with the market of 20-plexes and if the above requirements
are common or rare(?)

 

[Thomas Beyer]

QUOTE (investmart @ Mar 17 2010, 11:15 PM) Great info, thanks everyone.
seller mentioned there will be no VTB and no 2nd mortgage. plus 1st mortgage must be assumed. not sure if this is just a negotiation tactic OR a real definite condition/requirement(?) well I guess one way to find out is to put an offer. just not that familiar with the market of 20-plexes and if the above requirements
are common or rare(?)
Very common .. But common is also that seller has unrealistic price expectations and that therefore buildings don`t sell !!

 

[Nir]

QUOTE (ThomasBeyer @ Mar 18 2010, 11:10 AM) Very common .. But common is also that seller has unrealistic price expectations and that therefore buildings don`t sell !!

THANKS.

 

[2ndstory]

My four-plex is over 100 years old. If we were in Europe, that would be considered a pretty new building.

Nik

 

[Nir]

QUOTE (2ndstory @ Mar 19 2010, 01:52 PM) in Europe that would be considered a pretty new building.
are we comparing apples to apples though? i.e. climate, structure, material..

 

[Thomas Beyer]

QUOTE (investmart @ Mar 20 2010, 08:47 PM) are we comparing apples to apples though? i.e. climate, structure, material..
yes .. although climate is harsher in Prairies .. i.e. -25 to +3o = 55 degree temperature swing .. not so common in Central Europe

but BC vs. Northern Europe is pretty similar in terms of climate and people .. and land cost, buildings permits, taxation, ...

 

[Nir]

QUOTE (ThomasBeyer @ Mar 20 2010, 09:26 PM) yes .. although climate is harsher in Prairies .. i.e. -25 to +3o = 55 degree temperature swing .. not so common in Central Europe

but BC vs. Northern Europe is pretty similar in terms of climate and people .. and land cost, buildings permits, taxation, ...

THANKS