UNLOCKED

We spent $100,000 on an abandoned high school, and $3.3 million to convert it into apartments—take a look inside

://www.cnbc.com/2023/04/25/apartment-building-abandoned-high-school-unlocked.html?utm_term=Autofeed&utm_medium=Social&utm_content=Intl&utm_source=Facebook&fbclid=IwAR2NmoSZb_1FioBFd99OtOyuZvkJ_MwAF1CaEOWJSq9IDCbvuxZ0YM1qLgw#Echobox=1686117657

If my quick calculation is correct their return without accounting for expenses is around 15%. By the time you pull out operating expenses I would bet the cap rate is around 8-9% which isn't bad but not what I would call stellar given the risk they faced undertaking the project.

I see a future with lots of office space conversions to apartments.

Huge and growing glut of office space out there.

Had not thought a lot about it but huge hallways seem like an easy place to put closets on each side for the rooms. Build the wall out from door to door then knock a hole in the room for an entrance.

I had picked up a school that was already converted back in 1995. The folks that converted the place bought it for only $25,000. I bought it three years afterwards for $1,160,000. The place was generating more than $1,000 each and every day.

I am inclined to believe that for the most part the folks who did the conversion had about $900,000 into the place. so they made some money, but they didn't see the cash flow aspect on this place. The place costed me only $5,500 for the bank payment but was bring in $34,000/ month.

How many of these deals do you need for cash flow? More over you are able to jam pack commercial tenants into the middle floor, longer term tenants on the ground floor and starter units on the top floor.

So what are the pitfalls that can trap developers? Make sure the property has a GROUND floor, first floor and second floor instead of it being called three stories. Three story places require sprinklers through out.

If you have commercial tenants using the same access point as residential tenants, you are asking for trouble.