Thanks for the response. 9% cap on the NOI makes sense. I didn’t not consider assumption (more familiar with residential financing more than commercial). The owner lives a few hours from the property and didn’t likely manage it properly, which partially explains the vacancy rate. Thanks again for your help!
Just got a call from a motivated seller. He has two 10-unit townhome style apartments, with two separate 1st mortgages for each set of 10 units (20 units total) at prime + 0.5%. He has a 50% vacancy rate (!) and is 3 months behind on both mortgages and just looking to get out. He lives out of the immediate area and doesn’t have time to manage the apartments.
A few questions:
Can this property be short saled?
What cap rate/NOI should we be looking for?
Would any lenders be willing to finance this deal with no doc and credit scores 730-780? How much money would we be needing to put down?
Any general suggestions on how to approach this deal?
Any help would be extremely appreciated. Thank you in advance!
I really think to need to know more about the current debt situation. Do the loans have to be assumed? If so, how much is debt service? Is there a pre-payment penalty? How much? If the loans don’t have to be assumed, then I would write an offer based on a 9% capitalization rate. In other words, figure out what the NOI is, then write an offer based on a 9% cap rate.
This may be an extremely low price… but you are paying for an income stream. If the owner could have the place 90% occupied, wouldn’t they? Write your offer and if they don’t like it, move on to another deal.