Need advice on possible first deal - Posted by Farris/VA
Posted by Farris/VA on September 10, 2003 at 15:27:23:
I have a 16 unit condo complex in mind. Brand new construction; each unit is 960 sq.ft, 2 BR, 1 1/2 BA, all appliances included. Seller is asking 75K per unit as listed (slightly over market). Willing to sell at 60K per unit if I buy the entire complex. Seven contracts with intent to buy are sitting waiting on final condo assoc. paperwork to be completed with the state (any day now). My realtor feels good about the market being able to support these condos, great location; and could sell rather guickly. This is what I have worked out. Seller will take 60K per unit (960K) if I buy the entire complex. I have arranged to put down 160K, and the bank will float me 2 400K 1year notes at 7.5%. Upon acceptance of my offer (not made yet), I can start trying to move these units. My research tells me I can get 69,900 per unit (slightly below market). As each unit sells, I’ll pay off the first note and get back my down payment. It’ll roughly take half of the units to do that. Then try to sell the remaining units. After a year, if any units remain, I can convert to long term financing if needed and carry some units myself. Rent can bring in $550 per month with expenses researched to be around $400 per month. So it looks like I stand to gross a little over 159K if I sell all 16 units, or have a positive cash flow of $150 per month per unit.
Does it sound like I have covered all bases? My lender is also a friend and investor and he feels comfortable about the deal and says it looks good and doable. I’m not in love with this complex by any means but the numbers look quite enticing.
I welcome your thoughts.