New to the board I normally invest in single family homes. I have my eye on a property a while and recently found the owner after 9 months . Its a mix use property that has been vacant since 2004.
Its close to a big university and can be rented out to the college kids. the owner is willing to sell for the right price.
tax assessment
$393,700 land
$243,600 Improvement
$607,833 total and taxes are
TOTAL TAX BILL: $11,210
It has no NOI since its vacant. It needs a complete rehabb I got an estimate today from my contractor for around 200k.
3 apartments and 5 rooms. apts can be rented out for
apartment can be rented out for $750 x 3 x 12 = $27000
room can be rented out for $525 x 5 x 12 = $31500
total projected rents $58,500
The owner brought this in 2004 for $600,000.
How would you put this deal together and what would you offer the owner. any and all help is welcome. Remember I really don’t have numbers here and being new its hard for me to determine what I should offer.
As a crude start, compute the NOI once it is fully rented after the rehab. Based on the projected NOI what would the property be worth?
As you said it is mixed use, is there any problems with your intended future use? Does it have a retail until unit or something given the mixed use label? Are you expecting a change of use?
John this is my position trying to see what it is worth to me I forgot one detail i’m wholesaling this to a cash buyer.
there are no problems with my use it was use commercial with small offices
and looks like a residential house already and I on keeping it this way.
I’m thinking of offering 285k as it needs about 220k in work. the value is in the land tax assessment is 600k and should i not worry about the tax value
[QUOTE=John_Corey;884957]As a crude start, co mpute the NOI once it is fully rented after the rehab. Based on the projected plan NOI what would nothe property be worth?
As you said it is mixed use, is there any problems with your intended future use? Does it have a retail until unit or something given the mixed use label? Are you expecting a change of use?[/QUOTE]
IF,
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I do not care what you are doing. If you buy to hold or are flipping it, the value of the building really will not change.
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You said it is mixed use. I think in your reply you are not implying it was a commercial building (offices) and you are suggesting that it would be converted into residential. Let’s get that bit clear. True mixed use would have a mixture of use at the same time (retail, office, residential, or some other combination).
I understand the building is not used now. What was it used for last?
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I was not all that concerned about the cost to improve or change the property. I was asking what it would produce for income once it was operational. The NOI after it is up and running. If you do not know what the costs will be, they can be crudely estimated to approximate the NOI. Once the NOI is estimated, the income can be capitalized to determine the value of the building.
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It might work out that the tax value is completely wrong. More so if the use in the past is not the same as the use going forward. For that reason I am not too interested at this stage. As an income producing property, I am mostly interested in knowing the income after expenses. The tax authority can be part of a debate later if they have the tax value wrong.
John_Corey thanks I appreciate your help, the use before was small offices in one half and apts in the other half.
total projected income once its operational is $58,500
[QUOTE=John_Corey;884959]IF,
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I do not care what you are doing. If you buy to hold or are flipping it, the value of the building really will not change.
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You said it is mixed use. I think in your reply you are not implying it was a commercial building (offices) and you are suggesting that it would be converted into residential. Let’s get that bit clear. True mixed use would have a mixture of use at the same time (retail, office, residential, or some other combination).
I understand the building is not used now. What was it used for last?
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I was not all that concerned about the cost to improve or change the property. I was asking what it would produce for income once it was operational. The NOI after it is up and running. If you do not know what the costs will be, they can be crudely estimated to approximate the NOI. Once the NOI is estimated, the income can be capitalized to determine the value of the building.
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It might work out that the tax value is completely wrong. More so if the use in the past is not the same as the use going forward. For that reason I am not too interested at this stage. As an income producing property, I am mostly interested in knowing the income after expenses. The tax authority can be part of a debate later if they have the tax value wrong.[/QUOTE]
IF,
When you say the total rent after the conversion is $58,500, I am assuming you mean total gross income before adjustments for vancancies, credit and operating expensis. If that is correct, what do you expect the NOI to be?
A crude estimate is the expenses will be 50% of the gross income so you are looking at $29,250 as the NOI.
What is the cap rate for similar property in the area? Divide the NOI by the cap rate and you have a crude estimate for the value of the building.
Maybe the estimate for the NOI is off. Fine. Now you know where to dig deeper to make sure the number in approximately right.
The math could tell you that the building is not worth what you were first thinking. Or it might imply the cost of the conversion is not worth the it compared to sticking to the current use. Have you estimated the income if you leave the building as mixed use?