Looking for Opinions on this Multi Unit - Posted by Greg

Posted by Prashant on April 10, 2006 at 21:36:33:

Greg,
Hope you have success. Any news on how the deal is going through?

Looking for Opinions on this Multi Unit - Posted by Greg

Posted by Greg on March 29, 2006 at 14:42:10:

Here is a property I’m researching and would like any favorable feedback.

I want a no money down purchase. I would like to offer 90% of the asking price.
Some lenders allow a 90% loan on the appraised value. This would give me 100% financing.

Price: $4,250,000

or

90% = $3,825,000

Here are the details from Loopnet.

Scheduled Gross Income: $912,726
Vacancy/Credits: $73,018
Total Expenses: $443,964 ( can be reduced )
Net Operating Income: $395,744
Debt Service: $291,206
Other Capital Costs: $25,500
Pre-Tax Cash Flow: $79,038
Expenses/Unit: $4,353.00
Expenses/SF: $3.94

Number of Units 102
Occupancy: 92.00%

Lot Size: 8.90 Acres

Price/Unit: $41,666.67
GRM: 4.66
Cap Rate: 9.31%
Cash On Cash: 16.97%
Year Built: 1974 ( Updated - Very Nice condition )

Interest Rate: 6.35%
Amortized Over: 30
Due In: 10
Annual Debt Service: $291,206

Current loan must be assumed

Good Luck - Posted by Jimmy

Posted by Jimmy on March 31, 2006 at 08:48:44:

If you find a commercial lender who will make an acquisition loan based on an appraisal, when the purchase price is less, PLEASE POST THE INFO RIGHT HERE. I will do a backflip as I reach for my telephone.

My lender will allow me to do a refi based on appraisal, but only if (a) I have been in the property for more than a year, or (b) I have made substantial improvements. Never seen a definition of substantial, but they did allow me to refi a property on appraisal 9 months after I bought it, but I had invested more than double my purchase price in the rehab.

Re: Looking for Opinions on this Multi Unit - Posted by Josh Geyser

Posted by Josh Geyser on March 29, 2006 at 22:59:57:

Greg,
I hate to be the bearer of bad news, but it looks like your desire for no money down financing probably would not be possible for this property. The loan amount and the last phrase “current loan must be assumed” makes me think this is not a lender that might allow for you to try and come in with no money down.

Many assumable loans do offer supplementary financing on top of the assumed note, with rates only slightly higher than that of the assumed note. However, these types of programs usually will only go to a maximum 80% LTV (some might get you as high as about 85% though). Since the seller is stating you must assume their note (probably because of yield maintenance or a lock out of some sort), it would be necessary for you to figure out who the lender is and what LTV they might allow you to get up to.

Happy hunting as you are looking for a Multi-family property to purchase.

Josh

Re: Looking for Opinions on this Multi Unit - Posted by Greg

Posted by Greg on March 30, 2006 at 13:23:36:

Commercial appraisals don’t work the same way that residential appraisals do. As long as the underlying numbers support your negotiated purchase price within reason (say, a 1.2-1.3 Debt service coverage ratio), the appraisal will probably come in at the value of the negotiated purchase price. Commercial properties are NOT valued based on comps, but rather their income.

Re: Looking for Opinions on this Multi Unit - Posted by Walt

Posted by Walt on March 31, 2006 at 23:16:09:

And the income you cited is the killer.