Deal Abstract
Ten unit multifamily building in Shirley, MA looking for value add to section 8 rental. An unusual location in the Boston metro area. What prop mgmt and renovation is required for this property to be a good investment?
Part 1. The Basics
| Question | Notes |
|---|---|
| 1. Property Name: | 4 Davis |
| 2. Property Full Address: | 4 Davis St, Shirley MA, 01464 |
| 3. Property Listing URL: | https://umf.com/listings/83919084 |
| 4. Property Year Built: | 1885 |
| 5. Property Number of Units/Doors: | 10 |
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/1S0NYHUfk1c_Iowi3MnZivpcsWEwSrbCPX4L6oTfTN50/edit: UNDERWRITING COMMENT |
| 2. Asking Price: | $2600000: PRICE COMMENT |
| 3. FFEIC Median Income: | $112974: INCOME COMMENT |
| 4. Last Year's Annual Rent: | $252756: RENT COMMENT |
| 5. Last Year's Annual Expense: | $-62047: EXPENSE COMMENT |
| 6. Last Year's Net Operating Income (NOI): | $183126: NOI COMMENT |
| 7. 5 Year Internal Rate of Return (IRR): | ****: IRR COMMENT |
| 8. Yearly Cash on Cash (CoC) Rate of Return: | ****: COC COMMENT |
| 9. Debt Service Coverage Ratio (DSCR): | ****: 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 | |
| 2. Am I the right buyer for this deal? | FIT SCORE | 1. Based in MA, close to home, 2. Solid 10 unit building, though the price per door is not cheap, 3. Solid incomes in the neighborhood |
| 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. Value add to command market rents, 2. Keeping OPEX in check, 3. Good management in that part of MA
What the Risks Are
1. Expensive, high rents already, not sure of room to grow; 2. Unclear investment thesis for this part of town; 3. Old buildings are high opex/maintenance costs
Bonus Muhan's Notes
Excited to do the UW spreadsheet and see what's good
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
Notice trends in how you think
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.