Cheaper money make a deal work - Posted by ras1398

Posted by ras1398 on September 21, 2003 at 15:11:29:

True…I tried to talk them down…but the market that i’m in is seeing ridiculous valuations on even “ghetto” properties.The property i’m looking at is in an excellent location and has a great unit mix…One 3/2 and three 2/2 with 4 garages and a laundry room. The High price has Alot to do with interest rates and purchase power of exchange buyers. I also don’t see much movement in interst rates in the near future 10-14 months maybe 60-80 basis points. I will keep looking however but I just thought there might be a way to get a better rate than 10-12% on a second…No one said it’s going to be easy …

Cheaper money …to make a deal work - Posted by ras1398

Posted by ras1398 on September 21, 2003 at 24:08:21:

I am a recent college grad working on getting my first deal done. I am making unsolicted offers to owners of 4-plexes in the area. I have had good success but am having a hard time making the numbers work. I am not exactly the best financial shape although i have pretty good credit . I have a 690 midscore.
The deals are in the 500-650k range. I am looking for 100% financing with the owner taking care of closing costs. They don’t mind because we are saving 20-30k in listing fees.
It is going to be owner occupied ,stated and maybe even NINA. I tried to get owners to carry back but they want the money for thier 1031 exchanges
I have gotten 2 quotes from brokers as a 80/20 with 80 @ 7.25-7.5 % and the 2nd @ 10-12% w/a 1pt orgination fee. on an avg 550K purchase i am looking at a PITI of 5250 a mo putting me in the hole 800-1500 /mo because they just arn’t pulling that king of income. I don;t think i can absorb that right now. (my price range is 300-620 ideally for soCal 4plexes) I work 2 jobs and make around 50k /yr. I only have around 6k saved.
Is there anyway I can make something happen anyway to get cheaper money ?.. I really want to make this happen …
Any advice would be greatly appriciated…

Re: Cheaper money …to make a deal work - Posted by Brenda Whittaker

Posted by Brenda Whittaker on September 26, 2003 at 14:05:10:

It looks like even if the money was free you’d be in the hole! You might need to drop this one and look for a 4 plex that generates enough income to support the expenses. Take total rents, (minus the unit you’d be living in of course, ) subtract 5% for vacancy rate, then subtract all maintenance, taxes, and insurance expense, (find out exact costs from current owner), and that is your Net Operating Income. Whatever that number is, it has to be enough to pay the monthly mortgage payment. I wouldn’t get into something with as much negative cash flow as your’e talking about! If you already need to work 2 jobs, this could really do you some damage.

Re: Cheaper money …to make a deal work - Posted by tom

Posted by tom on September 21, 2003 at 20:45:43:

the only way you are going to get cheaper money on this structure is through the seller. no third party is going to do it for less unless you put up other collateral, ie a free and clear house. as you have mentioned the sellers want all cash, and they can insist because of the current market forces. i would suggest you purchase something you can afford. try mobile homes or SF.


Re: Cheaper money …to make a deal work - Posted by Bob

Posted by Bob on September 21, 2003 at 09:41:43:

The rates you outlined are pretty good already. And don’t forget to add other costs such as maintenance into your numbers. The deal’s economics just might not work - you may have to pass and move on, or since the seller is getting all cash, can you talk him down further on the price to where you at least break even on all-in cash flow?