Need Help
I have been approved for a loan that’s for a multi-family commercial building (20 units or more). The minimum amount they will loan me is $2 million and they will only fund me 92% of the 2 million. I am looking for an investor who can come up with the other 8% cash and is willing to partner up with me on purchasing commercial real estate.
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""they will loan me is $2 million and they will only fund me 92% of the 2 million. I am looking for an investor who can come up with the other 8% cash""
And u come up with 0%...thats funny
No, I thought I mentioned the part where I bring the company that has the $1.8 million
My best advice is tell him politely your not interested and move on. this is a very difficult market and a property like his is tough to get lenders , or investors interested in it, even if he owner financed it. time is $$.
Where is the property located?
Michigan
I found a way to target people that are interested.. via the management companies who also deal with lower classed bad neighborhood properties in case anyone else comes into this problem as well.
Good price, but hard to make money. you can do it, and make money, but only if you have a good & cheap onsite manager.
Otherwise, i think you will be just breaking even and dealing with a bunch on nonsense everyday.
good luck
When I first started in the business I concentrated on studio and one bedroom apartments in a neighborhood in Chicago just like you describe. The common wisdom was that bigger units have more stable tenancies and are therefore easier to manage. So there was a substantial cap rate discount on the smaller units just like you are seeing. you have to get used to the idea that your tenants are going to be more transitory than if you have bigger units and, therefore, you have to be marketing all the time. But with that relatively small effort you get a big payoff, how many other 20 cap buildings are you seeing?
Eventually I got out of the residential end of the buisiness to concentrate on commercial properties but even at the end I was still primarily a small-unit investor.
More concerning to me would be that there are only 16 units. There is an over head cost to each building regardless of how big it is. When you are a small investor this cost is mostly in your time and can be ignored if the building is close to your home. As your operation gets bigger the "per site" cost seems to grow. This is why big companies cannot afford less than 100 units at a location-- it takes that much volume to offset their "per site" cost.
This is what the other posters are getting at when they talk about the need for cheap on-site management.
How far from your house is this property located? How active do you plan to be in the management? Do you have experience with similar properties or similar neighborhoods?
16 units is pretty small to get a Property Management company on. Perhaps a live-in building super?
Thanks for your replies,
I now have an executed sales agreement with the owner holding a 15% second and the bank giving be 80%. I can go to closing with 5% down; and did I mention the selling price of 195k for 16 units?
What do you all think?
2 bedrooms are better overall and are worth more.
Check out how much deferred maintenance there really is.
Too small to support an onsite manager. Youre buying yourself a career in property management.
Still could be worth it if you are willing to fixup apartments and deal with deadbeats yourself.
My advice. Find a good handyman in the building. Give him free rent and $500/mo to handle maintnance. You better get your spreadsheets and standard leases together, you will not be able to get a decent prop manager for this prop, be ready to do it all.
The money is there, but id look into only handling the admin, to keep your sanity. good luck