CRE fianancing ideas would be appreciated - Posted by Joan Wardzala
Posted by Joan Wardzala on June 30, 2002 at 19:47:15:
I posted this on the other board too.
I just viewed 2 four-family units. One building has 4 one-bedroom apartments and the other 3 two-bedrooms and one three-bedroom. The buildings are next to each, on a corner, on a busy street. The entranceways face the side-street. There are 2 parking pads for 6 cars each. According to the seller a business across the street offered him $15,000.00 for the parking pads. The building lots are large. The appliances, water heaters and roofs are fairly new. The furnaces, however are ancient. There is a separate furnace for each apartment. The income is $1,700.00/month each building. I could get more. He wants $135,000 for one and $139,000 for the other. They should appraise right around there, maybe slightly higher. He has owned them for 1 year and has FHA assumable loans. He purchased them from a friend for cheap and fixed them up. He says at these selling prices he has around $60,000- $70,000 in equity. He lives in one of the units and wants to rent it after he sells the building because he put a lot of money into the unit. He would not consider managing the buildings.
The buildings are brick with a solid foundation. The couple apartments I saw are in great condition and large. There is work that needs to be done to the hallways. The neighborhood, though no where near the top one around here, is decent. The tenants that I saw look decent too.
He says he is desparate to sell because FHA has called his loan. He talks alot but I don’t think he is telling me everthing about why he needs to sell. He says he only has a little bit of time before he has to sell. It sounds like he may have said both would be owner occupied to the bank and they caught him. I am just guessing. He says he was told he can’t have two FHA loans and that is why they are insisting he sell. He says he wants out of the landlording business and wants $60,000.00-$70,000 out of the buildings so he can buy a used car lot and ship cars to Costa Rica (He’s from there). He will only sell them both and won’t take a contract on just one.
He is financed through Homeside Mortgage in CA. I found out on the internet that they have been bought out by Washington Mutual but are currently still using the name Homeside Mortgage.
I would like to purchase these two buildings for cash flow. (After that I want to start flipping, but cash flow is my main target right now). He is willing to pay closing costs but that seems to be all for right now. I already own 2 duplexes and one single family that I purchased last year. My credit score is around 65. I was told a while back that since I own three buildings that after I go past owning 4 buildings it is considered a commercial purchase and would be much more difficult to get a loan. I live in one of my duplexes now. Does this rule still hold true if I am living in one? If I purchased the 2 buildings as a package that would be considered commercial too since it would be 8 units, right?
I have never assumed a loan. Stupid question: Do I need a downpayment? I don’t have any cash right now. Is it difficult to assume a loan. Would I have to assume both of them or could I buy one and assume the other? Both are held by Homeside. Would I want to assume the loans?
Any ideas on how to put this together would be greatly appreciated.