This deal was brought to me by one of my Mastermind members. It's still a "live" deal so I changed some of the details (and the photo too). But the "essence" of the deal remains the same: - 400 units; rents are under market by $200/mo (current average rent/unit: $1,000/mo/u) - Property was built in 2015 but somehow their operating expenses are 55% of the collected revenue; based on experience, the operating expenses should be 40% for an apartment complex of this age - Asking price: $25M- the location cap rate right now is 7% but to be conservative, we're using an 8% exit cap rate - lastly, the units need about $10K/u in updates' Step 1: Calculate the Proforma Value 1.1 Proforma NOI = $1200/mo/u x 400 u x 12 mos x (1- 40%) = $3,456,000 1.2 Proforma Value = $3,456,000/ 8% = $43.2M Step 2: Calculate the Over-all Profit 2.1 Profit from the Sale: $43.2M - $25M (purchase) - $4M in capex = $14,200,000 2.2 Profit from the cashflow - let's assume for now (for simple math), we're paying 7% interest only at 75% LTV - loan amount: ($25M+$4M) x 75% LTV = $21,750,000 Cashflow = NOI - debt service= $3,456,000 - $21,750,000 x 7%= $1,933,500 To be conservative, we only consider 4 years worth of cashflow. To be exact, one needs to do a proforma projection over a 5-yr period. Profit from Cashflow = $7,734,000. Total Profit = $21,934,000 Step 3: Calculate the Returns My favorite metric is Equity Multiple, which is calculated as follows: EM = (Profit + Investment)/Investment The Investment = 25% x ($25M + $9M) = $7,250,000 EM = ($21.934M + $7.25M)/$7.25M= 4.02x Our minimum to proceed is 2.5x. This is a whopping 4x So it's definitely worth looking into and making an offer on. What do you think? #apartmentinvesting

(when you see *this...usually it's a good deal) This deal was brought to me by one of my Mastermind members. It's still a "live" deal so I changed some of the details (and the photo too). But the "essence" of the deal remains the same: - 40 units; rents are under market by $300/mo (current average rent/unit is only $600/mo/u) * When I heard the rent to be $300/mo/u, that's an indication that there is a deal here. Apparently the landlord did not increase the rent for several years now. - "C" property (based on this, the operating expense ratio is 50%) - Asking price: $1.8M- the location cap rate right now is below 9% but to be conservative let's use 9% - lastly, the units need about $5K/u in updates for total capex of $200K Step 1: Calculate the Proforma Value 1.1 Proforma NOI = $900/mo/u x 40 u x 12 mos x (1- 50%) = $216,000 1.2 Proforma Value = $216,000/ 9% = $2.4M Step 2: Calculate the Over-all Profit 2.1 Profit from the Sale: $2.4M - $1.8M (purchase) - $0.2M in capex = $400,000 2.2 Profit from the cashflow - let's assume for now (for simple math), we're paying 7% interest only at 75% LTV - loan amount: ($1.8M+$0.2M) x 75% LTV = $1.5MCashflow = NOI - debt service= $216,000 - $1.5M x 7%= $111,000 To be conservative, we only consider 4 years worth of cashflow. To be exact, one needs to do a proforma projection over a 5-yr period. Profit from Cashflow = $444,000 Total Profit = $844,000 Step 3: Calculate the Returns My favorite metric is Equity Multiple, which is calculated as follows: EM = (Profit + Investment)/Investment The Investment = 25% x ($1.8M + $0.2M) = $500,000 EM = ($844K + $500K)/$500K= 2.69x Our minimum to proceed is 2.5x. However, given the location and unit count, we should strive for a 3x EM. Regardless, it's a deal worth making an offer on. What do you think?

Attend our live podcast TONIGHT, April 24, 8 PM eastern. Discover the Secrets to Scaling up to 100 Units or More and how to do that in 12 months or less. Go to https://stream.bigdealmike.com to register!

Two students of mine brought me this deal. Since it's the deal is still LIVE, I changed some of the details, including the photo and this property may or may not be in Florida :) Market rent should be $2,496 (current rents are under market by $200/mo/u). The asking price is $8.5M. The cap rate in the area for comparable properties is 6.25%. The building is less than 20 years old. We estimate the operating expenses to be around 40% of the gross rents collected. A lot of the units are renovated already but the owner is retiring and wants to cash out. There's still $120,000 in renovation left. What do you think? Is this a DEAL or NO DEAL? Step 1: Find the Proforma Value 1.1 Proforma NOI = $2496/mo/u x 34 units x 12 mos x (1-40% operating expense) Proforma NOI =$611,021/yr 1.2 Proforma Value = $611,021 / 6.25% = $9,776,333 (let's round this down to $9.7M) Step 2: Calculate the Returns from the Property 2.1 Profit from the resale = $9.7M less $8.5M less $0.12M capex Profit from resale = $1.08M 2.2 Profit from the cashflow (we only count 4 years of proforma cashflow over a 5-yr hold, because we can't increase rents by $200/mo/u all at once & operations are still not stabilized) Cashflow = NOI - debt service Let's assume financing is 8% interest only. Debt service = (Purchase + capex) x 75% LTC x 8% = ($8.5M + $0.12M) x 75% x 8% = $517,200 Cashflow = $611,021 - $517,200 = $93,821x 4 = Profit from Cashflow = $375,284 Step 3: Calculate the Returns 3.1 Cash on cash return = Annual cashflow/ Investment = $93,821/ {($8.5M purchase + $0.12M capex) x 25% downpayment} = $93,821/ $2,155,000= 4.35% 3.2 Equity Multiple (over the 5 yr hold) = (Profit from resale + Profit from cashflow + Investment)/ Investment = ($1.08M + $0.375M + $2.155M)/$2.155M = 1.67x We look for deals that have a cash-on-cash return of at least 6% and an EM of at least 2.5x. So this is NOT a deal at $8.5M. At what price do you think this becomes a deal?

This one was a pre-foreclosure that I bought during Covid. The owner of the hotel told his bank that he was willing to go into foreclosure and just return the key to the bank. The bank was in a state of panic and got a broker. The broker in turn called hotel operators to see if someone was willing to take over this hotel. My hotel operator was one of those people whom the broker contacted. My hotel operator told me about the deal and even helped structure the deal. We told the bank that we'll assume the mortgage. The bank even waived the customary 1% assumption fee. In other words, we got the hotel with $0 downpayment! I love to buy houses, apartment buildings and hotels that are in the preforeclosure stage. Why? I can do 1 of these 3 things: 1. I can assume the mortgage and pay the back payments (if there are); or 2. I can buy the mortgage note at a steep discount; or 3. I can negotiate a shortsale and create equity Do you want to learn all three techniques? Tell me in the Comments if you want to learn more.