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- May 7, 2008
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- 31
Multiplex Due Diligence
- Thread starter afshinrein
- Start date
- Joined
- Aug 30, 2007
- Messages
- 13,881
QUOTE (afshinrein @ May 13 2010, 12:41 PM)
I am about to buy a multiplex (20plex) in K-W-C. Any suggestion, Due Diligence I should do?
20 plex is about 60 to 100/door in KWC or 1.2M to 2.0M depending on quality and location. Assume 20-25% down unless a large VTB can be had by client .. so about 300 to 600K in cash + mortgage personally guaranteed.
Look at and then carefully evaluate many items as depicted below .. and be prepared to spend about 10K on reports for appraisals, engineering and environmental reports.
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 .. or $2M might be a bargain for a 20 suiter in KWC depending on rents, location or quality etc. ...
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.
Complex problems have simple, easy-to-understand wrong answers ..
Buying a building is not that simple (i.e. price/door or CAP rate) as many factors have to be considered such as:
a) CAP rate
b) price/door
c) what is behind teh door i.e. condition of suite
d) what is in front of door, i.e. condition of common areas
e) rents today
f) immediate rental upside
g) long term rental upside
h) balconies ?
i) suite size or price per sq ft
j) views ?
k) macro-location, i.e. future of city/town
l) micro-location i.e. suburb
m) condition of major elements like roof, boiler, windows, balconies
n) interest rate on mortgages
o) cash per door i.e. cash-to-mortgage
p) availability of 1st and 2nd mortgage money
q) condo conversion abilities / potential
r) who pays utilities
s) potential future tax increases or decreases
t) ability to lower operating expenses
u) curb appeal
v) "feel" of suite / attractiveness
w) competition from new construction
x) competition from existing buildings
y) in-migration
z) new jobs coming (or leaving)
.. maybe I forgot 3 or 6 more ..
one of these elements overlooked .. and there goes $100,000 or $1M in potential profits !!
Multi-Family Primer in May 2009 Issue of Canadian RE Magazine:
http://myreinspace.com/rein_members_only1/Members-Only_Discussion/81-10996-Multi-Family_Primer_-_May_2009_Issue.html
20 plex is about 60 to 100/door in KWC or 1.2M to 2.0M depending on quality and location. Assume 20-25% down unless a large VTB can be had by client .. so about 300 to 600K in cash + mortgage personally guaranteed.
Look at and then carefully evaluate many items as depicted below .. and be prepared to spend about 10K on reports for appraisals, engineering and environmental reports.
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 .. or $2M might be a bargain for a 20 suiter in KWC depending on rents, location or quality etc. ...
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.
Complex problems have simple, easy-to-understand wrong answers ..
Buying a building is not that simple (i.e. price/door or CAP rate) as many factors have to be considered such as:
a) CAP rate
b) price/door
c) what is behind teh door i.e. condition of suite
d) what is in front of door, i.e. condition of common areas
e) rents today
f) immediate rental upside
g) long term rental upside
h) balconies ?
i) suite size or price per sq ft
j) views ?
k) macro-location, i.e. future of city/town
l) micro-location i.e. suburb
m) condition of major elements like roof, boiler, windows, balconies
n) interest rate on mortgages
o) cash per door i.e. cash-to-mortgage
p) availability of 1st and 2nd mortgage money
q) condo conversion abilities / potential
r) who pays utilities
s) potential future tax increases or decreases
t) ability to lower operating expenses
u) curb appeal
v) "feel" of suite / attractiveness
w) competition from new construction
x) competition from existing buildings
y) in-migration
z) new jobs coming (or leaving)
.. maybe I forgot 3 or 6 more ..
one of these elements overlooked .. and there goes $100,000 or $1M in potential profits !!
Multi-Family Primer in May 2009 Issue of Canadian RE Magazine:
http://myreinspace.com/rein_members_only1/Members-Only_Discussion/81-10996-Multi-Family_Primer_-_May_2009_Issue.html
- Joined
- Oct 10, 2007
- Messages
- 4,733
Thomas`s post is a good starting point of items to look out for
If you`d like building / location specific thoughts please let me know the address or general area.
If you`d like building / location specific thoughts please let me know the address or general area.