Just finishing a 4plex in a really cool, up-and-coming neighborhood that we renovated on behalf of an outside investor.
Was reviewing the original pro forma and revising in light of what I believe the rents will be… and got an annoying surprise.
Based on the original pro forma, this was not a deal that we could afford to do with our investor money. The numbers were not quite there.
But, now, with the new rents, I think our client is going to be looking at:
- All-in around $1.33MM, of which $600k was a loan and $733k was cash
- $ / sq ft of $312
- Rent roll of $127k
- NOI of $90k
- Unlevered yield of ~6.8%
- Estimated valuation of ~$1.6MM
Our client used a loan on acquisition, so I think his current, levered yield is around 7.8% / year. When he refinances based on the new valuation, he’ll pay off his existing loan, pull out $560k and be earning 14% on the $175k that remains in the deal.
Why is this annoying? Because I wish I had done this deal for myself!!!