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Maine Multi Unit Investment Real Estate (Part 2 of 3)

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First off my apologies for such a delayed response in getting this next entry out.  No excuse but for out there on the front lines making the billions.  Also been working to get my associate brokers license, a 64 hour course twice a week for 8 hours a time that seems to have put a squeeze on trying to fit everything else in….

Where to look, how to determine appropriate pricing

Where are the markets?  Greater Portland and Lewiston/Auburn I would classify as the A regions, each with well over 150 buildings on the market.  B areas worth investigating would be Bath/Brunswick, greater Augusta and the greater Bangor regions with each areas having 50-75 units or so on the market.

The biggest issues with smaller multi’s are making the numbers work and figuring out what the actual numbers are as records kept by owners, if they exist at all, are generally not accurate.  Property taxes and utility expenses are continuing to spiral upwards at rates much faster than rental rates are rising as well. Heat is such a huge swing variable, it generally makes or breaks a deal based on whether the tenant or landlord foots the bill.

So…looking at buildings, first thing I do is figure out what the average cost per unit for a given area and size of a unit is, for example in Gardiner the average cost for a unit seems to fall around 30-40K where in Portland the cost is closer to 100-150K now rental rates in Gardiner range around 600 with heat included for a 2 bedroom whereas in Portland the rent can be as high as 1200 with the tenant paying for heat. Knowing the market, checking past solds, and consulting with experts is essential.

After getting a rough idea of cost/unit and having my list of buildings I am interested in I will begin making additions and subtractions to the buildings cost/unit based how much deferred maintenance there may be or how well the building has been cared for.

The 3 primary categories are structure, systems and cosmetics.
Structure – the roof, siding, foundation, basement condition, windows, insulation, etc.
Systems -  Heating, plumbing and electrical systems.
Cosmetics  – Bathrooms, Kitchens, floorings, wall coverings, common areas, landscaping, etc.

After making the rough adjustments I then have a much better sense of if the building is priced appropriately, I will also make a spreadsheet of the various items and their estimated useful life remaining and what it will cost to fix/upgrade when the time comes,  you will be surprised how quickly the costs on this list add up!

Next part – expenses and running the numbers.

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