What should my exit strategy be??? - Posted by Bill

Real Estate Investing
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Posted by Bill on March 18, 2008 at 16:09:52:

Thanks Penny

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What should my exit strategy be??? - Posted by Bill

Posted by Bill on March 15, 2008 at 12:49:01:

I have a 10 plex in poor to fair condition in a declining neighborhood. The boiler and roof are new. The rents are average but high for my area. All my tenants are in poor health and the average age is 52. I have hsd the bldg for 1.5 years. Apartment building are still being built in my city due to a strong local economy and there has been and will be an increase demand for housing. I paid $109,00 for it and it cash flows $12,000 per year after expenses and mortgage. Should I kkep it for the cashflow or sell it, I think I can get $150,000.

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Re: What should my exit strategy be??? - Posted by Bill

Posted by Bill on March 17, 2008 at 12:15:28:

David, I appreciate your in-put. Can you tell me how much oyu would expect to make on a $109,000 bldg after all expense? My cap rate is about 18%. Most of the apartment buildings around here are only capping at 8%. What amd I missing? What kind of cap rates do you have? I am not being antoganistic. I know I have a good money maker for now. I get your point on getting out now but let me know what ever else I’m missing since you said you would never buy something
for that price that for that price that only makes only $12,000 after expenses and deb service. I would appreciate some more of your in-put.

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Iwouldn’t pay $150,000 for a $12,000 cash flow - Posted by David Krulac

Posted by David Krulac on March 16, 2008 at 07:40:35:

in a declining neighborhood, but that’s just me.

If it were me as seller and I could get $150,000 I’d sell in a New York minutes.

I expect that any offers that you get from knowledgeable and experienced real estate investors are going to be well south of $150,000, possibly south of your purchase price.

Why did you buy this place? What were your goals? The neighborhood was probabely declining 1.5 years ago and the building was in poor to fair condition. What was your exit strategy, to turn it around on you.?

If it were me and I could sell for $150,000, I’d consider one of 2 options:

  1. Fix it up improve the property, raise the rents and keep or sell then for a higher price.

  2. Dump that sucker asap.

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Re: What should my exit strategy be??? - Posted by ray@lcorn

Posted by ray@lcorn on March 19, 2008 at 08:58:30:

Bill,

I’m confused as to the valuation… what’s the NOI? (i.e. Gross revenue minus Operating expenses; before debt service)

ray

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Seller vs buyer perspective - Posted by Penny

Posted by Penny on March 18, 2008 at 13:28:30:

Bill,

What I took from David’s post is whether a prospective buyer would pay $150k for a $12k annual profit in a market that may be declining. At $109k, obviously they’d be queued up around the block. So if you are looking at selling at an exit strategy, $150k may not be the right number to be using in your calculations, that’s all.

Hope this helps.