40 Units - Help With Offer

Ok - my goal here is to acquire a 40-unit apt building with little moolah out of pocket. Here's what I'm thinking:

Ask: $2.6M
GRM: 9.01
CAP Rate: 8.69
Assumable 1st mortgage (bal unknown) at 5.625%. 2 Years left on the ARM.

I'm thinking of offering $2.2M, assuming 1st, bringing in new 2nd to 90% and then asking for a repair allowance to reimburse my entire down payment.

The deal will look like this:
GRM: 7.63
CAP Rate: 10.27

This thing will cash flow $75K/year after taxes. It needs work - mainly cosmetic as far as I can tell. It is offered as is.

Questions:
1. Can you successfully use a repair allowance to cover your entire down payment?
2. Thoughts on assuming the mortgage vs. bringing in a new 1st?
3. Are there any rules with a 1031 exchange (the seller has planned) that would kill a deal structured this way?

Comments(6)

  • 64Ford11th November, 2004

    Typically repair allowances are held in escrow account to insure that are actually used for repairs.

  • lassitermarketing11th January, 2005

    Mantis thanks for the feedback. I made my offer as described above and they flat out laughed at the time. But lo and behold I got a call today from the listing agent saying that the seller will agree to 5% down and a sales price of 2.2M but no way on the repair allowance.

    So now they are "motivated".

    The assumable loan at 5.67% has a balance of $1.56M. Essentially my offer before was for $2.075M due to the repair allowance I requested. And she's not willing to carry back anything.

    I'm thinking of offering a straight 2.1M, assuming the 1st and bringing in a partner with cash to cover the down of 5% and bring in a 2nd of the remainder.

    Thoughts?

  • REInvestorInTally22nd November, 2006

    I know this is an old thread, but could someone please respond. Also to the thread starter, what was the outcome? Thanks so much!

  • REInvestorInTally22nd November, 2006

    I know this is an old thread, but could someone please respond. Also to the thread starter, what was the outcome? Thanks so much!

  • finniganps26th November, 2006

    So did they get another buyer, and if so, how much did they get?

  • lassitermarketing26th November, 2006

    They pulled it off the market and did not sell.

Add Comment

Login To Comment