Need Help Negotiating On This Multi-family
Commercial size multi-unit property with an assessed value of $595k. It needs some work, after which FMV will be $640k. We've agreed on a final price of $540k. The seller has also agreed to carry back a second mortgage. Initially we talked about the second being for $100k. This would mean that I would get a first for $405k (75%), a second for $100k (18.5%), and would pay $35k of my own money. Now the problem.
The property is only 65% occupied. It could easily be better occupied, but the current resident property manager just doesn't want to do anything. He's even lost the keys to one of the empty apartments. Plus, the property manager lives at this location for free. So that means there are funds coming in from even fewer than 65% of the property. I'm concerned that with such a low occupancy rate, banks will be hesitant to give me a first mortgage for 75%. Do you think this is a valid concern? If so, what LTV should I be looking for in my first in this situation?
[addsig]
2 things jump out at me:
Get control of the property if you can. Pay $1000 for an (lease) option. Take over management and have the resident manager either start paying rent or move. Fill up the place, and then get the financing in place.
or
Buy it on contract (as close to 100% as possible). . Have one loan in place for 75% and the other for 25% (that can be subordinated later. After you've had it a year, done the repairs, and increased the income, refinance the first, keeping the second in place.
There are other ways to do it, but it sounds like you've got a motivated and willing seller.