What an Operator Sees
Honestly, I'm less interested in whether this pencils on paper and more interested in what it actually trades for. This is another 1987 building, and I'm trying to keep score on post-1979 product. Do buyers show up and how fast especially with rates ticking up. Broker says 6.46% cap. If that's real, I think it'll move. Sub-10 GRM gets people's attention.
The OM only has $5,000 for repairs and maintenance. I'd probably use $10,000. It's a 1987 building. Stuff breaks. When units turn you need 10-20k. Second, the rents don't strike me as being way below market. Most are already north of $2,000. Personally, I'd underwrite $2,200 and call it a day. Maybe there's more upside, but I wouldn't get too aggressive with the way LA is looking.
I like that the units are 875-square-foot and for one-bedrooms they are big. Big units usually rent better and hold tenants longer. I haven't seen the layouts, but I wouldn't be surprised if someone figures out a way to squeeze another room out of these and then can push rents to $2500 easily and that should be the play to look into.
At the end of the day, this isn't really about this deal. I'm just curious where these post-1979 buildings ultimately trade.
Broker wants $2.55M. My guess? Somewhere in the $2.2M to $2.3M range.
More importantly, I want to see how long it takes and whether buyers come out fast.