Deal Abstract
Small 5plex selling offmarket. Like that I'm getting off-market dealflow but need to figure out if numbers can make sense.
Part 1. The Basics
Off-market so subscribe to see more info, respecting seller's request to stay private.
Part 2. Quantitative, Numbers, and Financials ("Sow Passion, Not easy mediocrity", or S2 P6 N18)
| Criteria | Amount/Comment |
|---|---|
| 1. Link to Underwriting Google Sheet: | ****: Paywalled at seller's request |
| 2. Asking Price: | $700000: PRICE COMMENT |
| 3. FFEIC Median Income: | $69426: INCOME COMMENT |
| 4. Last Year's Annual Rent: | $63396: RENT COMMENT |
| 5. Last Year's Annual Expense: | $-19618: EXPENSE COMMENT |
| 6. Last Year's Net Operating Income (NOI): | $43778: NOI COMMENT |
| 7. 5 Year Internal Rate of Return (IRR): | -1: IRR COMMENT |
| 8. Yearly Cash on Cash (CoC) Rate of Return: | -3.5: COC COMMENT |
| 9. Debt Service Coverage Ratio (DSCR): | 0.76: 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 | Economy, I presume |
| 2. Am I the right buyer for this deal? | FIT SCORE | Off-market, close to my other properties, I like the size |
| 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. Appreciate rents; 3. Control costs
What the Risks Are
1. Limited rent capacity; 2. Insurance going up; 3. Property tax going up
Bonus Muhan's Notes
Yay off-market dealflow, also notably more deals are coming online in Rhode Island
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.
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