Multi-Family Property
I am a true newbie when it comes to Real Estate. A friend of mine talked to me about possibly partnering up to purchase a 42-unit property that requires serious work. The property is selling for $275K. He suggested that maybe he can get a HUD grant for $500K and also get a bank loan for $500K. He'd like to make all of the units handicap accessible. Doing this may guarantee him $1K in rent per unit, giving him about $42K per month in rent.
So Forum, any thoughts, suggestions, advice on me partnering up in a deal like this??? 
Would this be your first deal, in REI????????[ Edited by jcorp on Date 02/27/2004 ]
How experienced is your friend? That's a lot of dough and responsibility (management) to get into right out of the box.
How good of a friend? Trustworthy, reliable? I don't mean to be insulting but I have friends that if they asked ME to co-sign a loan with them for that kind of cash I'd be rolling on the floor laughing......at them.
Others I'd have less of a problem with - if they brought the cash
Your friend has a lot of "maybe"s in there.
MAYBE he can get a HUD grant
MAYBE he can get 1k per unit
I think a lot more due diligence is in order. For example: Ok, now you have this totally new kick a#$ apartment building with reasonable rents (for what tenants are getting) of 1 K - how many people in the area would go for it? If everywhere else offers nice apartments for $600/mo it's going to be tough. Know your market.
Roger
Speaking of HUD grants, can anyone point me to a place to go get more info on them? Also where is the very best place to get good unbiased info on the rental market in any particular area????
Thanks for the input!
Betsy
Give us more details about your end of the partnership.
What will your commitment be financially, contractually?
Who'll be doing the rehabbing? You? You friend? A contractor?
Also, have you and your friend considered how long this will take to rehab, and that during the rehab somebody needs to float the payments on two 500K loans? Is that in your budget? Believe me, you won't have any tenants to help with the costs for a long while.
And speaking of tenants, 40 units is an enormous commitment.
Question: what's the vacancy rate in your area? I know here in Mass. it's roughly 45%, meaning half of all units in the state go unrented. Landlords are taking it on the chin here.
Now I'm not saying that it's the same in your area, but the rental market nationwide is on the soft side because of low interest rates.
Can you guys afford a number of vacancies in the beginning?
I hope you don't think that you throw an ad in the paper and a week later you have 40 people clamouring to rent your units. It doesn't happen that way. Not in this market. It hasn't been a landlord's market since the late 1990's. And it won't be until we get 150K new jobs created every month and mortgage rates rising above 7%.
Until that happens, this is a renter's market.
[addsig]
By no means is there anything written in stone. We have absolutely no experience purchasing, renting or reselling property. We're very interested, but have a long way to go before we enter into any deal.
Is going through the University program on TCI best for people like us? (newbies to the real estate market)
If I were you friend, id attempt to get the grants, then I would sell them, for 50k a piece and take the 1.1mil and do another
[addsig]
No way should you be starting at this end of the market.
John
Quote:
On 2004-03-02 20:52, mssnay wrote:
By no means is there anything written in stone. We have absolutely no experience purchasing, renting or reselling property. We're very interested, but have a long way to go before we enter into any deal.
Is going through the University program on TCI best for people like us? (newbies to the real estate market) <IMG SRC="images/forum/smilies/icon_eek.gif">
I think this is too much of a bite into a first project. I would suggest putting this under contract & shopping the deal with more experienced investors. Just because you can ask $1,000 for handicap accessibility doesn't mean you will get it. An associated of mine did the same thing in California & converted units for accessibility, the problem was that the market didn't have enough demand in that "LOCATION" & he spent a small fortune to upgrade the property.
If you can sell this investment package with the loans in place you have created a lot of value without as much risk on your part. Assign this deal make some money & do more deals.
Good Luck
Thank you all for your posts. My last question is concerning TCI University. IS it the best way for a newbie like me to learn about purchasing real estate? Is it a good program? If not, can anyone recommend another/others??
mssnay,
You will learn quite a bit from looking at the posts and articles on this web site.
This is a large project for someone starting out. Others have said the same. You might consider something small, say four units or less and manage it yourself for a time to get the feel of management and an understanding of your cash flow. That way when you hire a property management company you will know how to manage the managers!