- Units: 19
- Cap Rate: 8.75 Percent
- Price Paying: $64.20 sqft
- Price Per Unit: $55,263
- Property Type: Multi Family
- Gross Rent Multiplier: 5.66
- Year Built: 1977
- Monthly Income Per Unit: $814.40
- Expense to Income Ratio: 50.49 Percent
Groveland Apartments was built in 1967 on 0.614 acres with wood-frame construction and full poured concrete basement. The exterior is brick with a pitched roof covered with asphalt shingles that was replaced in 2006 and has a 30-year warranty. This 2-story 18,040 square foot building has a unit mix of 2-900 ft.2 two-bedroom, 11/2 bathroom townhomes, 16-850 ft.2 two-bedroom, 1-bathroom garden-style units and 1-956 ft.2 two-bedroom, 1 bathroom basement unit. The laundry room with landlord-owned coin operated washers and dryers and building mechanicals are located in the basement including 2 hot water heaters and a gas-fired boiler that was replaced in 2005. Notable for investors is the well-maintained condition of this asset and the numerous recent upgrades including: exterior and common area painting, landscaping improvements, new carpet in 2 common areas, carpet and vinyl flooring (17 units), new ranges (13 units), refrigerators (5 units), wall AC units (5 units), 2-coin operated washers and a hot water tank. The utility breakdown of this property includes tenant-paid electricity. Water and heat at the property is the responsibility of the Landlord.
Groveland Apartments is performing at a high level of operations with physical occupancy at 94% and bad-debt levels at less than ½%. However, even in light of this stellar level of performance there is still upside potential. 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 two-bedroom units are a staggering $84 below market average Street Rents or $75 below the market at average $/Ft.². 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 two-bedroom units by a mere $40 per month it would increase this asset’s value by over $100K.
From an underwriting standpoint, our Pro Forma is based on actual 2016-2017 Operating Expenses, and we have also included a professional management fee, a Replacement for Reserve and adjusted taxes to the SEV. 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. We have projected a NOI of $91,898. In 2016, the property produced a $77,085 NOI and the 2017 NOI when annualized is on track for $95,508. Groveland is being offered to the market as new debt opportunity, allowing for an operator to lock in a 10-year loan before the all-time low interest rates begin to rise.
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