AN INTERESTING PROBLEM TO SOLVE! - Posted by David W. Hall
Posted by David W. Hall on February 05, 2002 at 09:43:25:
I have an owner who is willing to carry a note if I purchase his 31 unit, 1974, all 2br1ba apartment building for $1.2 million. That’s full asking price and it will appraise right at that price.
I can assume the existing loan no doc at $700,000. The owner needs $225,000 to recoup captial improvement expenditures over the last 2 years and an additional $100,000 cash profit. Everything else he will hold a note on.
My credit is crap so I need to get hard money on $300,000 with a payment no higher than $3000 per month until I can refi.
The existing payment is $5500 and the owner’s note will be $700 per month.
The apartments rent for an average of $557 per unit. Times 31, that is $17267 per month. These numbers come from profit and loss and rent roll actuals going back for a full year so actual vacancy is included.
Expenses per month after acquisition will run $5635 based on past performance and increases in insurance costs in Texas. This number is underwritten about $300 per month high as compared to past performance.
$17200-$5700=$11,500 net operating income
equals $2300 per month. If have to have at least $500 cash flow to make it worthwhile, so there is room.
The part that will make it work, to my level of understanding will be to get a $300,000 hard money loan at no more than 9% interest with no more than 1 point in a second position (owner will take third position).
I will refinance the property as soon as possible after I own it to pay back the hardmoney loan.
If any of you are hardmoney lenders and see this as a possibility, I could use the help. If you know someone who could help me to make this happen, I would appreciate it.\
I am also open to alternatives that I haven’t considered. Thanks in advance for the help.