Re: 12 unit condo deal - Posted by Penny
Posted by Penny on July 23, 2007 at 08:47:47:
See the following article - Ray Alcorn analyzes a highly leveraged apartment building. Many of the same principles will apply for you.
Some more things for you to check in your numbers:
Vacancy - what are the vacancy rates in your market area compared to your assumption?
Operating expenses - you are assuming about 20%-25%. This seems low. Look at the deal assuming a more typical to worst case. Try 40%-45%.
Debt service - a 12 unit is considered commercial, so a 30 year amort is unlikely and the rates will be higher than residential. A reasonable assumption for your calculations would be 25 years at prime assuming you are borrowing from a bank. With good credit, you could probably get a little lower rates.
For commercial financing through a bank, it is typical for them to loan up to 80% LTV. The least you can expect would be 10% of your own down, 10% seller carry second, and 80% first through lender. There are other ways of creative financing discussed all over this site, but this is common for commercial.
Hope this helps, I’m sure others will have good feedback for you, also.