7-Unit Assumable: HELP! - Posted by Norm WA

Posted by Nate on March 22, 2001 at 23:15:43:

You want to push off the balloon payment as long as possible to give yourself more flexibility.

You shouldn’t wait 36 months to refinance. Wait until you have maybe 6 months of new operating history and then approach a lender. They may want 12 months but you can see…


7-Unit Assumable: HELP! - Posted by Norm WA

Posted by Norm WA on March 21, 2001 at 23:51:25:

Looking for help or ideas…

There is a 7-unit offered at $175,000. Owner is changing jobs and can’t spend the time on the property. Has a remaining balance of $165,000 on an assumable mortgage. Property was appraised at $235,000!

Here’s the numbers:

Annual Scheduled Income: $30,900
Less 3% vacancy for this neighborhood: -$927
Less expenses: -$5275
Less Debt Service: (1850/mo) -$22,200
Estimated Cash Flow before taxes: $2498

Nothing earth shattering, but acceptable for a starter. His current mortgage interest rate is 9%. I SHOULD be able to refinance in a few months for LESS than that to increase the CASH FLOW, as well as gradually increase rents to market rate (which seem a little below currently).

I have NO capital for a down (a few thousand that might help with closing costs, that’s it). SO, I’m looking for suggestions on how to put together some kind of CREATIVE offer. I’m sure he will consider it because he sounded motivated on the phone about selling it.

Has anyone put together some kind of LEASE OPTION or LEASE to PURCHASE type offer before??? Thanks for any ideas.

Re: 7-Unit Assumable: HELP! - Posted by Charles

Posted by Charles on March 22, 2001 at 18:36:11:

If the seller is really motivated, assume his $165,000 mortgage and ask him to take a second for the extra $10,000 at a reasonable interest rate (maybe 8 percent or so) in the form of a balloon payment, say, 36 or 48 months out.

Raise the rents this year and then see if you can refinance to pay off both the first and second mortgages. You might even be able to take some cash out, since the property appraised at $235,000. Of course, it should appraise higher if you raise the rents.

Good luck. Sounds like a good deal.

Re: 7-Unit Assumable: HELP! - Posted by Norm WA

Posted by Norm WA on March 22, 2001 at 20:47:55:

Thanks Charles!

I met the owner today where we discussed possible deals, and YOUR suggestion actually came up as a possibility. His current interest rate is over 11% right now! So I’m pretty sure I’ll be able to refinance as long as the appraisal is about what he said it was ($235,000).

Just curious tho, do you see a specific reason to wait 36-48 months?