- Units: 32
- Cap Rate: 9.12 Percent
- Price Paying: $24.37 sqft
- Price Per Unit: $18,719
- Property Type: Multi Family
- Gross Rent Multiplier: 4.05
- Year Built: 1971
- Monthly Income Per Unit: $385.25
- Expense to Income Ratio: 63.09 Percent
$599,000 / $18,718 per unit
The City of Mt Morris is located in northern Genesee County, approximately 8.5 miles north of Flint, and 23.5 miles west of Lapeer. Genesee County is Michigan’s fifth most populated county and as of the 2014 census estimate has a population of 436,141 whereas the City of Mt Morris has a total population of 2,985 and a median age or 32.6. The City of Mt Morris is 1.25 square miles and is a friendly and safe small hometown. The median household income in Mount Morris, MI was $20,563 in 2015, which represents an 11.5% growth from the previous year. Additionally, there were 923 residents in Mount Morris, MI with jobs in 2015, which is a 2.56% growth from the previous year.
Arbor Lane Apartments is located on North St between Union St and Walter St. The property is just minutes from I-475 and within the immediate vicinity of Elisabeth Ann Johnson High School and Mt Morris Middle School as well as Rite Aid, Sav-A-Lot, Kroger and Family Dollar.
The 32 unit Arbor Lane Apartments were built in 1971 and consist of a 19,110 square foot 3-story, 30 unit building and a 1,684 square foot 2-story, 2 unit, single family house. The property contains a unit mix of twenty-six 742 ft.2 one-bedroom units, four 900 ft.2 two-bedroom units, and 2 units in the single family house. Numerous recent improvements include a new roof, gutters and down spouts and new parking lot in 2016.
At the attractive $599,000 asking price, or $18,719 per unit, this offering represents a compelling 9.12% cap rate. Most notably for the investor is the potential upside in occupancy. Based on our carefully conducted rent comparable study, it was determined rents are considerably below market when analyzed under both the price per square foot and Street Rent metrics. Our study found that one-bedroom units are a staggering $91 below market average Street Rents and two-bedrooms are approximately $45 below market. Such a delta between existing and market rents provides a new owner with the unique opportunity to greatly improve this asset’s cash-flow position without making any financial investment in the property. For example, if a new owner were to increase average rents on one and two-bedroom units by a mere $25 per month it would increase this asset’s value by over $125K.
From an underwriting standpoint, our Pro Forma is based on actual 2016 Operating Expenses, and we have also included a professional management fee. Income was projected with the use of average rents, which does not factor in the previously mentioned “upside” of a rental rate increase. We have also included a vacancy and bad debt factor that is consistent with current property trends. Arbor Lane Apartments is being offered to the market as new debt opportunity, allowing for an operator to lock in a 10-year deal before the all-time low interest rates begin to rise.
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