Any Suggustions How To Buy Multifamily With 100K PCF?
I have come across a multifamily property that looks good. It is a large subsidised property asking 2.6 mill. Assuming 100% finanicing at 30yrs with 7% int. running current expenses it still has a PCF of around $100K +/yr and rents are much lower than the AMR allowed by the housing athority. I would love to purchase but...I do not have any cash. I have tried contacting commercial lenders and they are all interested since the numbers work, but I don't have the $$ for a down payment, and currently don't even have the money for a commercial apprasal that might allow me to do 100% purchase price if that was a low enough LTV (if I can even find a lender). The seller is firm on $2.6.
Are there any suggestions on how to structure a deal to buy with no personal $?
Do you think I am aiming my sites too high?
carolina,
First, as a commercial mortgage broker I do not think that you are setting your sights to high. I think that you just need to know more about commercial investing vs. residential investing. You do have a couple of problems, but there are some answers!!!
You will not find any lenders that will loan a 100% on purchase price even if LTV will support it. The most you will find is 85%. So, you will have to see if the seller will do a seller carryback for the 15% - 20% that you need. The other problem is that you have no $$$ for appraisal!!! This will put a halt to everything...unless you can somehow come up with the $$$. This will not be cheap either. Look at my profile and shoot an email if you have other questions.
Thanks,
Mark
carolina_investor,
These numbers sound GREAT...
...but with no money out of YourPocket, I think it's time to look for a partner!
If this DEAL is what YOU say it is ...DON'T GIVE IT UP!
....as shizah says, after "a" partner is found, do a 75/25, 80/20 or a 85/15 loan.
.....but, DON'T let it get away FromYou..
....as always,
GoodInvesting, Rocky
[ Edited by 2000rock on Date 09/07/2003 ]
Thanks for the encouragement.
Does anyone know a ballpark estimate of what a commercial appraisal for a prop. like this would run? Or a guess as to how much a property would appraise for?
I had thought of trying to offer $3mill get an 80% first, owner holding a second and have him discount it or throw cash into an escrow fund equalling the annount for agreed upon repairs (less closing costs). Does this sound like it would work or is this legal thin ice?
The commercial estimates in Florida start at $2500.00 and work there way up from there. It will depend on your area and the number of units. Check with the lenders, but in he past I have been able to get away with a review apprasial for 500 bucks. Just contact the last appraiser of the property. Also you can sometimes negotiate 1/2 up front and 1/2 at closing.
Good Luck,
Kyle
You got a credit card? An extra vehicle? Some furniture you don't want? Find someone to take a second? Talk to the lender. I just saw a deal where the lender was offering a 90/10 on a 4 unit rental. They would do a 90% first and a 10% second. There's got to be a way. you've just got to find it.
Good luck
Ronnie
I am also in Charlotte, and would be interested in partnerring with you, should you chose to go that route.
Everyone always says commercial lendors will do 85% but I know one that does 95% with 5% seller carryback and allows seller to pay appraisel and closing so there is you no money deal
**Please See My Profile**
1. 1-4 units are residential loans not commercial, and the rates and terms are considerably different. 90/10 and 95/5 are most likely residential loans.
2. 85% is normally the max. for multifamily (>4 units) loans, except that some of the FHA programs will go to 90% for construction or major rehab properties.
3. The majority of commercial lenders prohibit 2nds, or limit them to 90% CLTV. 95% CLTV may be possible under ideal circumstances with a limited number of lenders.
Quote:
On 2003-09-05 00:18, shizah wrote:
carolina,
First, as a commercial mortgage broker I do not think that you are setting your sights to high. I think that you just need to know more about commercial investing vs. residential investing. You do have a couple of problems, but there are some answers!!!
You will not find any lenders that will loan a 100% on purchase price even if LTV will support it. The most you will find is 85%. So, you will have to see if the seller will do a seller carryback for the 15% - 20% that you need. The other problem is that you have no $$$ for appraisal!!! This will put a halt to everything...unless you can somehow come up with the $$$. This will not be cheap either. Look at my profile and shoot an email if you have other questions.
Thanks,
Mark
Mark you say you don't think he is setting his sites too high?
He doesn't even have the money for an appraisal.
What would you suggest he does if the deal goes through and one of the tenants breaks something the first day he owns the place?
Or the county finds that a couple of the apartments don't meet their standards for subsidized housing and he has a couple thousand worth of repair bills the first month?
What would he use for funds to take care of these problems???[ Edited by MrMike on Date 11/27/2003 ]
Thank you Mr Mike for some sensible talk. If you don't know what an appraisal would cost, and there is nothing wrong with that, and you can't even come up with it if you knew how much it was, you are in way over your head. period. I can not believe the people that trying to be encouraging, would point you to sure financial ruin. Please, if you have to ask if a deal is too big for you to handle, you've already answered your own question.
Good Luck,
Shawn(OH)
Quote:
On 2003-11-29 00:19, loanwizard wrote:
Thank you Mr Mike for some sensible talk. If you don't know what an appraisal would cost, and there is nothing wrong with that, and you can't even come up with it if you knew how much it was, you are in way over your head. period. I can not believe the people that trying to be encouraging, would point you to sure financial ruin. Please, if you have to ask if a deal is too big for you to handle, you've already answered your own question.
Good Luck,
Shawn(OH)
Thanks Shawn,
LOL Well I have paid my tuition to the school of hard knocks, more times than I care to remember.
Back then there were no forums like this.
Heck Al Gore hadn't even invented Information Super Highway yet. [ Edited by MrMike on Date 11/29/2003 ]
Maybe its just me, but $2.6 mil is a big deal, especially for a subsidized property. If an opportunity like this was presented to me, I would flip it to someone with plenty of experience and plenty of money so that he could give me a heck of a referral fee. It just seems like you should grow as the number of units you own grows.
Get used to dealing with tenants or a property manager with a 4plex or 8plex, then grow to a 10 or 15 unit, then and only then the moon. Make sure your foundation is strong before building on it.
Interesting post.
2.6 is a big deal. Your monthly morgage payment (according to your calculations) is $17K per month. It doesn't take very many financial mistakes for you to be unable to make your mortgage payment. It doesn't sound like you could pay a month of it from your current job. It's a deal that I would fear with a smile. It's fun to find a deal that keeps you up at night, isn't it!
First of all, give us some of the numbers on this property.
# units?
Rent per unit?
Vacancy rate?
GSI?
NOI?
Cap?
Let's see if anything looks fishy. Just because it has a PCF of $100K per year, doesn't necessarily make it a great deal (although it looks good from my calculations)
I'd be interested to know the price per unit and price per sq. foot of other sold (and similar) properties in the vicinity. Cap also. And then the same for this property.
There are 3 things you need to figure out to get a deal like this.
#1. Is it a great deal? If it is, you'll find money.
#2. How will I buy it? Parnters? Flexible lender? Seller Carry?
#3. What will you do with it once you've got it?
Will you manage it yourself? If so, what do you know about property management? Legalities? Documents? How will you track late fees? what leases will you use? Will you use a property management company? if so, which one? will they take care of it? will you be able to tell when they're screwing you? can you afford it?
(I guess that's more than 3 questions.....but you get my point).
If you can realistically figure out those three things, I'd go for it. Afterall....what do you have to loose besides time and risking your credit.
Keep in mind, that this won't be an armchair investment.....at least not for a while.
Keep in mind, this could bankrupt you, your partners, and destroy your credit. It could also get you out of the rat race in one move.
My first property that I purchased was a 24 unit apartment complex that I bought when I had 12K in savings, was unemployed, and my wife was working. I despise the idea of buying homes one at a time and renting them when I can buy 24 at a time, so to speak.
shoot low on your income projections and high on your expenses. You're not going to come out of the shoot at full speed. It will take a while to learn to manage it or get a property management company that you're happy with (there are 10 bad ones for every good one).
Start reading the book "Landlording" right now, whether or not you're planning on using a mgmt company.
If you can't figure out ALL THREE of those questions, then flip it to someone who can buy it and perform and move on to a property where you can figure out those things.
Good luck, and keep us posted.