Summary of the Deal:
1. Proven rental history, 100% occupied, with an informal wait list.
2. Below market rents - approximately $75 to $100 below market, plus a non-rented unit that needs nothing more than paint/carpet to lease out.
3. Budget includes hiring a third party manager who can more professionally handle tenant screening and immediately begin working on moving rents up to market levels.
4. There have been no new apartments constructed in Granville County in the last 5 years, with none in the pipeline - zero new supply gives existing owners great pricing power.
5. Units have been well maintained - little to no deferred maintenance needed, but would plan on doing some improvments (playground, picnic area, upgrades on units at turnover).
6. Lock in a very low interest rate for 10-years, with one or two years of interest-only .
7. Purchase cap-rate approx. 8.40% , which makes the cash-on-cash returns (10-11%) - very high for a multi-family property that is as well stabilized as this one is.
This is a solid B-class property, located in an area with a strong local employment base (state and federal agencies), which will benefit from growth in Durham. There are also two large projects underway that will significantly impact Butner and southern Granville County, click on the button below for more information on those.
This will perform like a standard multi-family investment (smooth returns, excellent demographic fundamentals), but it is being acquired for a retail/office type of cap-rate, due to the fact that it is a small deal and an estate sale with a motivated seller.