👀 453 Units, $1.5M Gap & a $100K Fee — What Would You Offer?

What’s up guys! I’m looking at a 5-facility portfolio out of Alabama right now from a wholesaler's perspective. The goal? Clear a $100,000 assignment fee while making sure the deal actually makes sense for an end-buyer.

Here is exactly how we break down the math when a seller's numbers look "too good to be true."

1. The Portfolio Snapshot

Total Units: 453
Total Sq Ft: 65,650
Total Monthly Income: $27,100
Annual Gross Income: $325,200
Current Occupancy: 82% (Upside alert! 🚨 ~81 vacant units)

2. The Expense Trap: Seller vs. Reality

The seller says they only spend $5,000/month on expenses across 5 locations. That’s an 18% expense ratio. Don't fall for this. Once a buyer takes over, taxes reset, insurance goes up, and management needs to be paid.

Standard practice is to underwrite at a 35% expense ratio. Here is the comparison:

SELLER’S NUMBERS:

Annual Income: $325,200
Annual Expenses: $60,000
Net Operating Income (NOI): $265,200

INDUSTRY BENCHMARK (35%):

Annual Income: $325,200
Annual Expenses: $113,820
Net Operating Income (NOI): $211,380

3. The Valuation (9% vs 10% Cap Rate)

In this market, sophisticated buyers are looking for 9-10% returns on actual performance.

Value at 9% Cap Rate: $2,348,666
Value at 10% Cap Rate: $2,113,800

The Reality Check: The seller is currently asking $3,550,000. Based on the real numbers, that’s a 5.9% Cap Rate. That is way too skinny for Class C storage in Alabama.

4. Reverse Engineering the Wholesale Fee

If I want to make $100,000 on this deal and sell it to a buyer who wants a 10% return:

Buyer’s Purchase Price: $2,113,800
My Fee: $100,000
Maximum Allowable Offer (MAO): 🛑 $2,013,800

💡 The Strategy

The "Gap" between the asking price ($3.55M) and our target buy price ($2.01M) is over $1.5 Million. To close this deal, we have to educate the seller on how commercial property is actually valued. We aren't just buying buildings; we are buying a cash-flow stream.

Negotiation Tip: Focus on the "forced appreciation." An end-buyer can fill those 81 vacant units and raise the NOI, but they won't pay for that "future" money today.

What would you guys offer on this? Let's discuss in the comments! 👇

4 comments