Apartments - Posted by Illinois Mike

Posted by Redline on March 03, 1999 at 13:16:25:

I’m looking at small deals: SFR’s, 2 families, etc. I wouldn’t know what’s out there right now for commercial properties.

RL

Apartments - Posted by Illinois Mike

Posted by Illinois Mike on March 01, 1999 at 21:55:40:

Has anyone on this board ever bought an apartment complex? I found a couple of deals but the large amount of money involved makes me shy away. One apartment I came across today in my local market has 50 units and is being advertised for $1,275,000 with a current market cap rate around 10%. I don’t know the gross/net income as of yet, but I do know that the owner is willing to carry a good portion of the note…he’s owned the property for the past 15-16 years (lots of equity). Let’s say that all the numbers work out and I can make a profit every month. Can I buy it? I only have $2,000 to work with and invest. I need help with the creative financing part. How can I do this? What type of capital will be needed to start out without going belly up in a couple of months. I also have “A” credit but no job (I’m back in college and also residential real estate). I appreciate any help!
Thanks,
Illinois Mike

Re: Apartments - Posted by Illinois Mike

Posted by Illinois Mike on March 02, 1999 at 11:15:54:

Thanks for the comments. I’m waiting on the income/expense statements right now. I have a friend willing to put up $5,000, but I still don’t see how to purchase a property this large with only a few thousand. There has to be a way to get into the property with 0 down…same as a Single Family Residence it’s just on a lot larger scale. My main concern would be the earnest money and closing costs at this point! Thanks again.
Mike

Re: Apartments - Posted by Jaime Raskulinecz

Posted by Jaime Raskulinecz on March 02, 1999 at 11:00:55:

I am currently in the same boat; just for a little less asking price . My deal is for 25 apts and I don’t want to go any higher than about $525K.

I have investigated several lending sources so far and the best I can get someone to do right now is finance 90%, with me coming up with 5% and the seller taking back 5%. This lender says they may possibly go as high as 95%, but will reserve the answer to that until they see numbers on the property, my business and personal taxes and financials along with credit checks.

This is actually pretty good for apt building financing in my marketplace, I’m learning.

BTW, I’m in NJ. If there is any way you can find a partner to come up with the downpayment, you may have to go that route for this big a purchase.

Jaime

A way to work it that works. - Posted by Andrew Smith (Phila)

Posted by Andrew Smith (Phila) on March 02, 1999 at 07:09:15:

Mike:
Talk with the seller to get all of the income and expenses for the property. Then discuss with the seller if they would be willing to hold a mortgage for 30% in second position to a banks 70% first mortgage. Many times with apartments and commercial property the seller is much more open to selling creatively. Prior to talking with the seller you might want to investigage commercial lenders in your area to see if they would be willing to lend under those circumstances. Many will not but you only need to find one that will. Often, it is the smaller banks that will. Good luck.

Re: Apartments - Posted by PBoone

Posted by PBoone on March 02, 1999 at 24:35:25:

I have to agree with Dan(or). BE extra careful in the due dilligence. Many Many Many (I cannot emphasize enough) Investors look for people to unload thier problems (apts) They prey on inexperience and will use their knowledge to use you as a dumping ground. Trust noone or nothing he says in particular go into it with the attitude from Terry Vaughn "Play the game when the odds are in your favor to win or dont play"
Pat

Re: Apartments - Posted by DanM(OR)

Posted by DanM(OR) on March 01, 1999 at 23:24:33:

Mike,

One thing I have been running into time and time again is that the Cap rates advertised are always inflated. If you are lucky the Cap of 10 is probably with zero-five percent vacancy, which is almost never the case. Be sure to get actual numbers for the expenses and if you get serious ask to see their IRS schedule E form. It will tell you the truth.

Good luck! Do your Due Dilligence please!

Dan

Re: Apartments - Posted by Redline

Posted by Redline on March 02, 1999 at 12:31:07:

Jaime - I’m in NJ also. I’m curious … which part of NJ are you? Sounds like you have a decent lender. Post some details on this deal - if you don’t mind.

RL

Re: Apartments - Posted by DanM(OR)

Posted by DanM(OR) on March 02, 1999 at 17:27:48:

Amen!

The Realtors in the commercial arena have all been liars here in this part of the country. They sell the “could be” Cap rates. Not the Real Cap Rates.

Good Luck!

Dan

Re: Apartments - Posted by Tom Brown

Posted by Tom Brown on March 02, 1999 at 14:01:09:

Here is an example to support the above post:

The owner of an apartment building was changing his investment direction to another type of property. He was selling one of his last buildings. He was selling the building for no money down, just assume the existing debt. He did mention that there was a past due utility bill that the buyer would have to assume.

After a little investigation:

The building had $10,000 in back taxes owed.
The past due utility bill was over $20,000 and the city owned utility company was in the process of completing the paperwork necessary to seize the rents to pay the bill. After that, the utilities would probably be cut off unless there was a sizable deposit paid.

The balloons on the financing were coming due in about three years. The cash flow would not be sufficient to generate enough money to come close to covering the refinancing costs.

So much for “No Money Down”.

Re: Apartments - Posted by Jaime Raskulinecz

Posted by Jaime Raskulinecz on March 02, 1999 at 12:47:08:

I’m in North Jersey. Where are you?

Believe it or not, the lender was a referral from a friend in SC and that’s where he is located. I have another source in this neck of the woods, but it is through a RE attorney and I don’t have all the details.

I don’t want to post too many details about the deal just yet. We don’t have control of the property. Waiting for offer to be accepted.

Jaime

Re: Apartments - Posted by Redline

Posted by Redline on March 02, 1999 at 12:52:10:

Jaime -

North Jersey also … Giant’s Stadium Area. When you’re further along, let me know how things are going (or went) …

Thanks,
RL

Re: Apartments - Posted by Jaime Raskulinecz

Posted by Jaime Raskulinecz on March 02, 1999 at 13:44:19:

Will let you know how it goes. Just found out from the local source that their 2 lenders think the deal is too small for them.

What kind of RE investing do you do? If apts what is the minimum down payment you’ve been able to get away with?

Jaime