Most outrageous claims in an OM?

I submitted an offer on a 45 unit apartment building today. It was a call for offers situation so we made (what we thought) was a pretty strong offer. Based on our underwriting which was fairly aggressive we were offering an 8 cap. This is a value add deal in a tiny market in the northeast.

The broker is a one map shop who sells single family homes and the occasional multi. The proforma annual operating expenses were $2300 per unit yer year including management. All tenants pay is electric and the building over 50k square feet. The building is old as hell and we will be lucky to heat it for that amount if oil and gas rebound at all. The broker told me my offer was insulting, that I was a joke, and I about half of what he anticipated other offers coming in at.

It really is too bad because this guy obviously jacked up his clients expectations and now they will never be happy with a realistic number. What is the craziest shit you have seen a broker include in an OM?

 
youngunner:
How do you get decent cash yield at a 5 cap post value add? Can you walk through your thought process and quantify it.... older, multi fam, value add, below a 5 cap, minus 50bpts after renovation capital invested...?

no he's saying the 5 cap is pre-value add

 
Best Response

Most outrageous claim I've ever seen was actually a broker's bio.

He was repping the seller of a middle-of-nowhere tract of land in Arkansas. Bio said something to the effect of:

"Broker X is one of the preeminent real estate experts in the world due to his love of the land. Broker X first got his real estate license in 1976, but iniitially kept his focus on tending to his rice and soybean farm; however, as a lifelong pilot, Broker X believes in soaring high. This mindset has allowed Broker X to build a winning portfolio."

I come from down in the valley, where mister when you're young, they bring you up to do like your daddy done
 

Wouldn't feel right outing the guy publicly (hence "Broker X"), just know that the pic next to his bio is a very fat redneck, wearing an ill-fitted suit, giving the Zoolander look into the camera.

I come from down in the valley, where mister when you're young, they bring you up to do like your daddy done
 
BBA18

Most outrageous claim I've ever seen was actually a broker's bio.

He was repping the seller of a middle-of-nowhere tract of land in Arkansas. Bio said something to the effect of:

"Broker X is one of the preeminent real estate experts in the world due to his love of the land. Broker X first got his real estate license in 1976, but iniitially kept his focus on tending to his rice and soybean farm; however, as a lifelong pilot, Broker X believes in soaring high. This mindset has allowed Broker X to build a winning portfolio."

I think you've already given me enough info that I think his name is Jim and he loves firearms and flies a cessna? 

 

Different dude, but funny that there's another guy who would match the description. 

I come from down in the valley, where mister when you're young, they bring you up to do like your daddy done
 
pere797:
not the craziest but I hate it with a passion when OM says something to the effect of "permit ready" then you find out broker had no fucking clue what that means after one call to the town.

This 100%. I now just assume they mean "you should be ready to do all the work to get a permit". If there is an actual NB on the property or whatever the relevant permit is, a good broker will specify

 

Not from an OM, but there's a couple guys in my market who are just so clueless and overpromise to their clients constantly on land deals, then also have no ability to market.

They'll flip me a site plan, satellite images they took off Google Maps, a one paragraph description of the deal, and then quote a price just wildly off market. Had one guy tell me they wanted $20pbsf above market for site plan approved land, then he casually mentioned a minute later that there was another $20pbsf worth of shared infrastructure costs the buyer had to assume. The other guy once pitched a complete unzoned deal to me at shovel-ready pricing.

 

I love a certain variety of statements found in industrial oms about how much population can be reached within a certain number of hours. The longer the drive time in hours they are using, the funnier it is to me. The other day I saw one that hilighted that 30% of the us population is within a 12 hour drive. Only problem is that basically is true for any site east of the Mississippi.

 

Honestly an 8 cap is near impossible to find on in place numbers. I mean you are talking straight up ghetto areas or something so bad that most buyers are not willing to touch.

As for the most outrageous claims, I can't think of one single one, but the most common and most annoying ones are where they say you can increase rents by $600 per unit. The problem is the subject property is a Class B built in 1965 with maybe a fitness center whereas the comps they are looking at are Class A, 2015 or newer and have every amenity you could imagine. Then the brokers tell me its easily doable, just replace the tennis courts with some fire pits and mini golf and boom people will pay $600 more for a shitty looking apartment.

Array
 

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