Posted by PBoone on October 27, 1998 at 22:51:18:
How much cash does the seller want?
Need advice on possible 6unit apt purchase - Posted by Kris
Posted by Kris on October 27, 1998 at 21:07:26:
I have a situation where I contacted the seller of a 6 unit apt building who wants to cash out but is may be open to some creative seller assisted financing (the ad said he’s motivated). Was on the market for 340k and he just dropped it to 310k. it has a $228,099 assumable 7.375% adj. 1st. The 2nd and 3rd were paid off. the monthly expenses total 1605.00/mo and the total monthly rents are 4,425.00 (low rents). The 1st is 1797.00/mo. I thought about offering a wraparound mortgage but I was wondering if there is a better way of going about it. If there is a way where the seller can get some of his cash out of it and maybe a little for myself at closing and still be able to keep a modest cashflow.
Any experienced expert advice would be much appreciated. Thanks a bunch.
Re: Need advice on possible 6unit apt purchase - Posted by Kevin(OK)
Posted by Kevin(OK) on October 28, 1998 at 09:25:17:
Why can’t you create a first, second and/or third mortgages. Sell the first, this should give your seller some cash. Let’s look at it: The numbers look better, and the seller will be more motivated if you give him the $340K 1st asking price (if it will appraise, and cash flow at that amount). OK, sales price $340K x 80% first mort. = $272K x 94% cash out = $255, 680 - $228,099 assumable loan = $27,581 cash to seller. Plus, the seller would get cash flow off of a $68K second mort. And if you can talk the seller into carrying a third to pay closing costs (to come out of his $27,581), this could be a no-money-down deal.
Just make sure you have looked at the seller’s last 5 years of Schedule C tax returns, to make sure expenses are what they say they are. Also, make sure you are deducting vacancy allowances in your total income numbers. Just remember that most no-money-down deals don’t cash flow very well, and save back some of your income for a rainy day (roof, outside paint, etc.).
Hope this helps
Re: What are the expenses for the property? - Posted by Andrew Smith (Phila)
Posted by Andrew Smith (Phila) on October 28, 1998 at 06:34:50:
You said that the monthly expenses total $1605 and that the rents total $4425. You did not say what the payments are on the 1st mortgage of $228,099. Also, do the expenses include taxes, insurance, utilities, management fee, repairs, capital improvements allowance, etc.? We need more information to help evaluate your position.