Sellers and real estate agents love to make prospective buyers believe that their properties never have any vacancies and if they do, it is just a temporary thing and with the right amount of “elbow grease” and the right vision you can turn it around and do what the previous owner couldn’t. This seems to be the line of logic that you hear again and again. The first thing that can give you perspective is to acknowledge the fact that if the current owner could fill up the vacant units or make additional repairs, wouldn’t they have done it already? Are we really supposed to believe that their units are not full just because the owner was too lazy or just didn’t feel like doing it? Always keep in mind that when someone has hundreds of thousands or millions of dollars tied up in a property they have every incentive to do what they can to keep the units filled. However, if you believe that you have the magic bullet to do what the previous owners couldn’t, then you deserve to make the big bucks for taking on the additional challenge and risk, but buyer beware!
Now, when accounting for vacancies, always realize that it is impossible to have 100% occupancy. There are always people moving in and out and units take time to clean and prep for new tenants. Always ignore pro formas and projected occupancies and NEVER pay for your own upside in the deal. It’s laughable how sellers or brokers will tell you all about the money that can be made if you just do a little of this or that and then they want to have you pay them for this potential profit! You earn your money from your hard work, vision, and risk taking, not theirs! If they could have done it they already would have.
When determining the effective occupancy, recruit the help of your prospective management company. They have tricks of trade that help them know what the real occupancy is. Also, be sure to go off of current rent rolls that can be completely audited. Don’t believe rent rolls supplied by sellers either. The only rent rolls that can be trusted will come from a third party source.
There are still good investment opportunities out there if you where to look. For more information on investment opportunities, please feel free to stop by our website at http://www.invesco.info
IVESCO/Virtual Banking Companies Unlimited, LLC is a Portfolio Selection Agent for an International Private Placement Trading Platform. For additional details on our investment opportunities, please visit our website at http://www.invesco.info and register your contact information so we may respond to you promptly.