Apartment complex - Posted by William
Posted by William on August 27, 2003 at 22:40:39:
I am in a bind and need some advice. I have been looking for motivated sellers and found them by the hundreds. I have three very large deals that I have been negotiating on and finally reached agreement on one and now I am in a bind. The owner of a 32 unit complex has agreed to defer down payment till I am able to achieve refinancing. He has also agreed to accept a promisary note for the rest of the payment with 8% 30 year amortization on a 7 year balloon. I have located a buyer who has cash and is willing to buy 4 of the units that are in a seperate building for $48,000. The owner also specified that I need to have a life insurance policy in force for the $435,000. He is also wanting me to go ahead and get prequalified for refinancing. Here lies the problem. I had the realtor that had the listing to call around, he of course wanted to meet the stipulations to recieve a commision, and find a bank that deals in real estate commercial loans. The President agreed to meet with us and so we went. The president was very impressed because I came prepared. He had already gotten all the paperwork on the apartments he was requesting. I walked in with numbers ran showing that the apartment complex with the present rents ,which are low and will be raised once some paint and other things are done, would support a loan of the appraised value once it is repaired. I ran very conservative numbers expecting that to be what the bank would do. My numbers were more conservative than theirs. Then I ran into my problem. I am hungry so I jumped on anything that acted like a motivated seller. He wants my personal cashflow and everything. He of course thought with all the knowledge I had that I must have other properties and said that would help. I explained that I had just started investing and had low capital and low assets. In fact besides a payed off car I have nothing. I was an independant life insurance salesman and did not like it as much as real estate so I stopped. I still service my business written but do not have a steady income stream. I have poor to bad credit, and am young. It is hard just starting out but I would say it is real hard when you are just starting out at everything. I need advice on what to try to negotiate or where to turn for money and anything else that would be helpful. The cashflow on the property is as follows. $7970 at full their is about a 8% vacancy factor but I run it at 10%. management company charges a 10% fee. The mowing and repairs is about 5% but I have been running it at 7%. Insurance is $1000.00 monthly as of now but I have checked and with the installation of fire extenguishers would drop at least $150.00 monthly. It will appraise for at the least $600,000 and the appraiser said if the inside was clean which it is it would go $675,000 as is. We are being conservative and saying that with siding and cosmetic things it will go $725,000. The biggest thing working for us is that their are not very many apartment buildings in the small town and there is a plant coming in that will hire 7 counties worth of work force. People drawing unemployment that are skilled labor. This means a big population boost real close to the part of town that we are in. The rents are ranging from $225 to $300 on the one and two bedroom apartments, the rent in the other two complexes is $300 to $375. If there is any more information needed or any advice please post it .