12 Unit Finance Question -- Mr. Garcia, Anyone? - Posted by Hugh James


#1

Posted by Hugh James on October 22, 1998 at 07:33:27:

Thanks for your reply, and I can understand your thinking given the little info I had posted. The lender that took this property back wants nothing more to do with it. Their selling price is less than they have in it, and it has left a very bad taste in someone’s mouth over there. I do have a banker of my own who will come up with enough money to acquire the property, but the rate and terms are stiff - really stiff - so he’s my last resort. ALso, the less I have to put down, the less reason I’ll have to have to take in partners. I’ll let you all know how this turns out in the end. Thanks again.


#2

12 Unit Finance Question – Mr. Garcia, Anyone? - Posted by Hugh James

Posted by Hugh James on October 21, 1998 at 15:42:53:

Just signed a contract to buy a 12 unit apartment building in Chicago out of foreclosure from a local bank at a terrific price. Need to know if anyone can recommend a lender doing business in this area at the highest LTV possible. Willing to look at short term money to acquire property and bring it up to speed. No major rehab, just redecorating. Six of the 12 units are vacant, because the bank refused to relet the units as leases expired. This is an excellent property in a solid area, and these can be redone and on the market within two weeks of closing. I’ve done several houses and up to four unit buildings, but never a commercial deal. Help! All advice appreciated.


#3

Re: 12 Unit Finance Question – Mr. Garcia,? - Posted by Ed Garcia

Posted by Ed Garcia on October 22, 1998 at 10:07:42:

High:
With the numbers you gave Jim Piper, the building would be worth
about $363,000., at a 12 cap You don?t mention what your numbers
were for deferred maintenance, but for now you have a 79% LTV.

With out knowing your financial picture, I?m at a disadvantage in
answering your question. However I just recently picked up a new
investor, and may be able to do the financing for you.

Also, in many cases you can get the bank to either fix up some of the
repairs, or give you a further discount on the deal.
Everything is negotiable.

My suggestion is for you to give me a call at (909)944-0199, and we
can go over the details. You spend the dime, and I?ll make the time.

Ed Garcia


#4

Re: 12 Unit Finance Question… - Posted by Cognac

Posted by Cognac on October 22, 1998 at 24:02:42:

Hi,

I’m in Chicago also and own commercial and smaller stuff too. Where’s the property located? And some stats would help too…

Thanks,

Cognac


#5

Re: 12 Unit Finance Question - Posted by JPiper

Posted by JPiper on October 21, 1998 at 16:51:03:

How about a few numbers??

JPiper


#6

Re: 12 Unit Finance Question – Mr. Garcia,? - Posted by Ed Garcia

Posted by Ed Garcia on October 22, 1998 at 19:18:23:

Hugh:
I apologize for misspelling your name.
Ed Garcia


#7

Re: 12 Unit Finance Question… - Posted by Hugh James

Posted by Hugh James on October 22, 1998 at 07:28:17:

Thanks for your help. It’s good to hear from someone in Chicago. The building is near Laramie and Diversey. Very good rental area. I’m posting some numbers as requested in reply to Mr. Piper’s request one note down. Please check it out, and e-mail me for my phone number if you’d ever like to talk real estate. Thanks again.


#8

Re: 12 Unit Finance Question (A Little Long) - Posted by Hugh James

Posted by Hugh James on October 22, 1998 at 07:56:27:

Thanks for asking, and (as Ross Perot would say) here’s the deal:

Purchase price $290,000. The building sold 12/96 for $350,000 and the bank that is holding it now loaned $280,000. Typical rents in this neighborhood would be $500-$550 for the 6 one bedroom units and $600-$650 for the six 2 bedroom units. Six of the units are currently vacant because the bank refused to relet them as the leases expired and tenants moved out. All of the apartments need redecorating. This would primarily be paint, carpet and flooring, perhaps a starter kitchen in a couple of them. Three or four will need new toilets and or new vanities but all the tub/showers are fine. All the tile work is good. Hallways will need to be painted. Stair carpeting may need to be replaced, and the two lobby doors need to be replaced to improve the curb appeal to renters. I know all this adds up, but there is no major rehab necessary to rent these apartments at a strong market rate.

There are two coin op washers and dryers. All of the buildings structural and mechanical components are excellent. There is no major deferred maintenance here.

Comparable sales in this area for a building this size are not easy. This is a corner building on a street with a bus stop on the corner across the street, so it is well travelled. This may be the biggest building in the neighborhood, as most of the properties here are single family homes. Here are comps within about a 4 block radius: Closed–7 units at $251K, 10 units at $375K, 6 units at $400K. Pending sales–9 units at $320K, 6 units $327K. Active listings–5 units at $264K, 8 units at $369K, 7 units at $419K and 9 units at $449K.

My appraiser ran some quick comps and threw me a ballpark (with good rents and nice apartments) figure of somewhere between $375 and $425 thousand as a reasonable appraisal when we’re done and fully rented. I’m sorry this is so long, and it’s probably more than you wanted to know. But when I know I’ve hooked a good one it just turns me on. The money is nice, but it’s the chase that gets me excited. In any event, I’ll appreciate any thoughts or advice you can offer. Many thanks.


#9

Re: 12 Unit Finance Question - Posted by SCook85

Posted by SCook85 on October 22, 1998 at 24:08:41:

I would have made sure I knew where the money was coming from before I signed a deal like that one. How much time do you have to settle? Commercial financing takes longer than residential properties. Appraisals take longer and cost more. It is more involved. The highest LTV for no money down commercial financing that I have ever heard of was 75% and that was with a 25% seller carryback second (I am assuming that you want to put very little to nothing down). Most commercial lenders will not lend 100% of the purchase price no matter how good your deal is. In fact I have never heard of one that will.
My suggestion would be to ask the bank that you are buying it from to finance it for you. They have financed it in the past. If they balk tell them that they can put a 2 year balloon on the property. That should give you the time to find refinance monies.

SCook85


#10

Re: 12 Unit Finance Question – Mr. Garcia,? - Posted by Hugh James

Posted by Hugh James on October 23, 1998 at 18:36:52:

Just a note to say “Thanks” Ed, for spending a considerable amount of your time talking to me about some of my options in financing this 12 unit building. You went way above and beyond the “call of duty” and your input is most appreciated. You learn something everyday, and you taught me a lot in just one phone call. Thanks again.