Due Diligence Tips for Buying Apartments with Nathan Tabor, Episode 39

John Casmon

6 years ago

Nathan Tabor has operated more than two-dozen businesses since 1999, grossing over $150 million in sales. He was introduced to real estate when a man came to his used car lot with a building he needed to sell. Since then Nathan has successfully flipped 26 properties in 9 years, grossing over $52 million in sales and has consulted on deals worth over $200 million. He’s had amazing successes and epic failures, and is the author of How to find, finance, fix and flip apartments. Today, he shares his take on the Winston-Salem market and his best due diligence tips when acquiring apartments.

Key Market Insights

Ran a “buy here, pay here” car lot when a guy walked in and said he had an 18-unit complex to sell
After having multiple issues securing financing was told to meet with someone who gentleman and received 100% financing
Had $500k in debt, sold it for $850k and netted $253k in profits
Second seller saw him doing the work and offered to sell his property and paid the same price per unit
Second deal had a setback issue that ended up costing $150k more than planned
Focus market is Winston-Salem and Greensboro
11th year investing in real estate and has seen 4 peaks and valleys
Sees big city investors coming into Winston-Salem
Gets almost sidelined in a timeframe like this when properties that should sell for $15k/door start selling for $30k-$35k/door
If market is maxed out at $900/mo for rent, you’re not getting more than that no matter what you do to the unit.
Focus on Class C or D+ properties with high issues, runs his number backwards, like a flip property
Cap rate determines value for the area based on what has been sold
In Winston-Salem properties have sold at 2%-3% cap rate, and others that have sold at a 24% cap rate
Look at Loopnet, CoStar or brokerage firm to help determine cap rate
Cap Rate = Net Operating Income / Sales Price
Most properties are in 7.5-9% cap rate
Found opportunities in rural areas, 15 minutes from downtown, off MLK,
Seeking an owner in distress or ready to exit
Pulls police records, city complaints, housing authority from last two years and looks for patterns
80% of people don’t have a business plan for their business