Multi Unit Building - How To Buy Smart?
hello again,
basically i went out to look at some property, located deals on east coast florida between 650k to 1.9mil.. these buildings have 10-25 units each some on the ocean some not, all kinds of areas but mostly good,
question - since everybody is trumpeting that this is the sellers market ,by how much as a rule of thumb are these properties overpriced or where should i start an offer percentage wise,
also how does the finnancing work on properties like this, does the 20% down work or is it more for mil and up
thanks for your insight
george
To determine if the deal you are looking at is overpriced or a bargain, you will have to invest the time to know the market. One way to do this is to work with a good broker with a speciality in multi-family investment.
Once you know the submaket and where the buildings are trading at, you can better determine if the deal is priced at a fair GRM or CAP rate. Until then, it's all smoke and mirrors.
As far as financing goes, it depends on the type of loan program and the history of the property and the submarket in general. First things first, deal with a bank that is comfromtable with making loans on multi-family assets. Otherwise, you may be setting yourself up for an 11th hour bomb.
Well you need to find out the NOI and Cap Rate of these properties. Also, most banks are not going to go below 1.20 DSCR. You need to obtain a market cap rate from an appraiser, realtor or lender for the type of property you are evaluating. (make sure that the cap rate value was determined with recent sales of comparable properties and not constructed).
Hope this helps.
Jeff
[addsig]
The lender will provide a standard 80% LTV, can be higher depending on your credit, either full doc or stated, depending on loan amount. 90% CLTV is standard with the seller holding a 2nd. Youi need to know the financing available and have a readily available funding SOURCE available to you regardless of the commercial property type.