Please help me with analysis of this big deal

[stevelaw_2000]

Hi everyone,

  Yes I am new at this and I seem to have a great oppurtunity here. I am looking at buying 24 2bdrm townhomes in 4 buildings. They rent for a low $450 a month in Little Rock, AR. They are almost always filled. With a waiting list. They look really nice. Infact I live in one. Everything is kept up and only one building will need a roof in the next year. Here's the problem. People from all over the US have looked at them and the highest offer to date has been about $750k. They are asking $850k but will take $800k. Gross annual is 125K per year after 5% Vacancy. After all expenses in AR totaling 32k the net on Invest is about 92k. Why hasn't anyone snatched this one up?
  Of course I want owner financing on this deal myself. What is the standard way of figuring value since there has been no appraisal. What is the going interest rate for commercial/investment property?
  I sure would appreciate some help with this one.
  Thanks in advance. :hammer

[Eric C]

Take a closer look there, guy.

On this site there is a great article on due diligence by Ray Alcorn. Read it. Then read it again and again until you understand it.

Commercial properties (although this is a tad on the small side) like this usually attract pretty savvy folks.  Generally speaking, Real Estate is experiencing a dramatic upswing in popularity -- so, if this thing is having trouble selling there may be (probably is) a reason.

Ask youself how these folks came up with those numbers for expenses, gross revenues, vacancies? What about deferred maintenance? Has the area around it deteriorated?  What about the competition? Newer units in town -- where? rent for how much?

Etc., etc...

Take care,

Eric C

PS - if you can verify it, the fact that there is a waiting list is a good thing -- usually means the rents are low (too low?). Sometimes, a seller will lower rents (or not raise them) to keep the property full to impress prospective buyers.

[stevelaw_2000]

Hi Eric,

  Thanks so much for the reply. That sounds logical. Then area has declined a bit reciently but I didn't think it was that bad. I will read that article and check with the other prospects.

  Thanks again,