1st time out - found 2 apartment buildings… advice? (long) - Posted by AmyS
Posted by AmyS on May 11, 1999 at 10:18:57:
My husband and I have been getting into CRE the last couple of weeks. (We actually managed to do two 0 down deals in the past year without really being interested in CRE… go figure).
Anyway, this week we’ve found 2 apartment buildings with very flexible sellers. We were originally going to focus on Single family, but since these came up we thought we’d give them a try.
24 unit apartment building. Owner needs to sell because his family has a medical emergency. He doesn’t speak much English and he has tenant problems.
Asking ~600K (they claim based on income, but judging from the expenses they gave us, we think this may be flawed… advice on getting a FMV on a 24 unit apartment bldg?)
Gross Income is 98,500
The expenses the seller is giving only come to 21% which strikes me as VERY low. Adjusting so they come up to 35% I get a net operating of 64,022.
There is an assumable 1st of ~350k at 9% - pmts 40,5k/yr
The seller will consider a 2nd, we are thinking of offering at 8% - pmts would be 21.3k /yr.
This would leave 2.2k cash flow/year.
Downsides: This is in a questionable neighborhood. What guidelines do some of you use in determining if an area is too dangerous to invest in? The other downside is the expenses given. They seem far too low. We will ask to see the tax return, but I doubt we will get a peek until after we’ve structured our offer.
12 unit apartment bldg. Seller is investor trying to get out of the business.
Price : 295k
Asking that the underlying 1st is cashed out (~105k)
Wants 15k down and will finance the rest at 8%.
After running the numbers we get a NOI of ~30k
We think we’ve found a lender who will do 100% 70/30.
We’re thinking of getting a 70% new loan, then asking for a 30% 2nd at 8%. Also, there seems to be a large possibility on this one of getting cash out at close. For example, taking a 70% loan, and a 45% 2nd.
After debt service (at 70/30) there is a cash flow of 5k/year.
Comments??? This seems pretty good to us. However, never having purchased multi-unit buildings before we have some reservations in general.
Sorry this is so long… What do you all think???