Deal Of The Week

24 Units: Deal Of The Week 10-15-2020

Eric Wilson
December 15, 2020

24 Unit Complex

Highlights: This week we are featuring a “bread and butter” deal.  This 24 Unit complex is in a northern suburb of the Tampa Bay MSA.  The location is within five minutes of a major open-air shopping center providing access to shops, entertainment, and a variety of dining options.  The property is also a quick 25-minute drive to downtown Tampa.

The property itself consists of two 12-unit buildings with a resort style pool and cabana area located between them on a lushly landscaped 8-acre site.  The property is gated providing security and privacy for the residents. The units all feature a 980 square foot townhouse layout featuring 2 bedrooms and two and a half baths with a modern upgraded finish level.  Built in 2017 the units and grounds are in excellent condition.

Repositioning: Acquisition price will be $2,640,000.  This property is a textbook case of an investor biting off more than they can chew.  The current owner acquired the project from a development company that builds and then markets turn-key investment opportunities to out of state investors.  Although the project is well constructed and fully tenanted the current contract management company is not performing up to the expectations of the owner creating a strong desire to sell. The rent collections indicate that the current rental rate is substantially below market.  Units of this size and quality are in very high demand so an adjustment to market rent will yield an increase in annual rental income $43,200.00 with no negative impact to the occupancy rate.  My team has also identified several other line item expenses that are well above the market rate.  By bringing in our professional management team we will be able to slash annual expenses by $13,000.00 or more year one.  This savings combined with the increase in rental income will boost the Net Operating Income by $56,400.00 which at a 6% market cap rate will boost the value $846,000 in year one while also providing great cashflow.

Target Returns 

Cash On Cash: Year 1  13.4% to Year 5 16.52%

IRR:   24.5%

Equity Multiple: 3.4x