New & Need Advice

I have not started my REI career yet but am seriously ready to get started. However I think I would like to start with Apartment complexes to have a good ongoing income coming in and because there are a couple forsale in my area. My problem is this... I have come accross a couple that appear to be a good deal as far as net income but not sure which way to go with financing.... would a sub to work with something like this ?

The financial specs are this
Asking Price is $4,395,000

Year: 2004
Scheduled Gross Income: $639,480
Vacancy: $34,140
Other Income: $43,200
Effective Gross Income: $648,540
Maintenance: $219,750
Taxes: $79,684
Insurance: $8,500
Total Expenses: $307,934
Net Operating Income: $340,606

they then list this option

Debt Type: Proposed
Loan Amount: $3,516,000
Interest Rate: 5.75%
Amortized Over: 30
Due In: 10
Annual Debt Service: $246,221

Loan Description:
Obtain new financing from current first mortgage holder at current market rates and terms or obtain financing elsewhere and pay sellers prepayment penalty (approximately $28,800)


Any suggestions ?
thx
rolleyes

Comments(4)

  • InActive_Account31st October, 2004

    Subto would work on any property that has existing fiancing in place. Do you even know what subto is?? You might want to read through old forums.

  • kenmax31st October, 2004

    sub2 will work. the "big" question is will the seller go for it. in order for you to have a shot at it you need to find out if he is a motivated seller and more important if so why? then you will have somewhere to work from. example: his health is failing, then a residual income might be attractive therefore possible sub2........km

  • riedel6331st October, 2004

    Thanks for your replys.... I have been reading the forums and have also read John Locke's sub to thats what I do manual. I was just wondering if approaching on sub2 would be the best approach.

    Thanks again

  • active_re_investor2nd November, 2004

    With a commercial property it can be that there is no personal guarantees, etc. Hence the seller might be able to sell with the buyer taking over the existing financing and the seller being off the loan.

    So, subject-to as normally discussed is mostly focused on smaller residential where the seller stays on the loan but comes off the title. In this deal the options are more varied so 'traditional' subject-to may be a bit of a red herring.

    Solve the seller's problem and see what the building will support.

    John
    [addsig]

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