Deal Abstract

https://www.loopnet.com/Listing/25-Margaret-St-Pawtucket-RI/33743465/

Twelve unit in Pawtucket that hasn't sold in 3 months. Wrote another underwriting with new underwriting format.

Part 1. The Basics

Question Notes
1. Property Name: 25 Margaret
2. Property Full Address: 25 Margaret St, Pawtucket RI, 02860
3. Property Listing URL: https://www.loopnet.com/Listing/25-Margaret-St-Pawtucket-RI/33743465/
4. Property Year Built: 1965
5. Property Number of Units/Doors: 12

Part 2. Quantitative, Numbers, and Financials ("Sow Passion, Not easy mediocrity", or S2 P6 N18)

Criteria Amount/Comment
1. Link to Underwriting Google Sheet: https://docs.google.com/spreadsheets/d/1oiiNj-PVWGVzLDjyTGeLYU-WEnK7G7AoP5_FeUCUDP0/edit?usp=sharing: UNDERWRITING COMMENT
2. Asking Price: $1950000: PRICE COMMENT
3. FFEIC Median Income: $65690: INCOME COMMENT
4. Last Year's Annual Rent: $156600: RENT COMMENT
5. Last Year's Annual Expense: $-67258: EXPENSE COMMENT
6. Last Year's Net Operating Income (NOI): $73682: NOI COMMENT
7. 5 Year Internal Rate of Return (IRR): 0: IRR COMMENT
8. Yearly Cash on Cash (CoC) Rate of Return: -2.5: COC COMMENT
9. Debt Service Coverage Ratio (DSCR): 0.81: DSCR COMMENT

Part 3. Qualitative, Pre-Mortem, and Investor Fit (Every Time Man Profits, Don't Dismiss Serendipity)

Question Score Notes
1. Why is the seller now? TIMING SCORE Good question, but hasn't sold in 3 months and dropped $500k
2. Am I the right buyer for this deal? FIT SCORE 1. 12 unit apt in Rhode Island, relatively new build; 2. BRRRR potential?; 3. Nice jump from 6 to 12
3. What has to go right for this deal to work out? Right Rating
4. People?
5. Distribution?
6. Durability?
7. Secret?

What has to go right for the startup to return money on investment:

1. More reasonable price; 2. Rents appreciate; 3. Expenses brought into ratio

What the Risks Are

1. Very expensive; 2. Limited growth due to FFEIC median income; 3. Ongoing expense ratio very high

Bonus Muhan's Notes

Old analyzer: https://docs.google.com/spreadsheets/d/1nV4v2BT9crCrmip7NF_CLvBrwbEwwblGvwcMls4X7wA/edit?usp=sharing

Updates

This is where I’ll post updates about the company. This way all my notes from offering to post-offering updates will be on one page.

Review these deal memos every time the startup raises a new round

Test if original thesis still applies

So, did I invest?

Click here to find out.

Other thoughts, questions, comments, or concerns? Write me at mail@muhanzhang.com and let me know.