Need advise for financing small apartment building - Posted by Joanne Hawkins

Posted by Michael Morrongiello on January 24, 2000 at 15:42:34:

If the asking price is $150K and the owners currently owe $132K in the form of mortgage debt against the property then there really is limited equity here to work with.

Have you determine what the exact amount of debt owed is ? and it it is less than $132K then what the sellers REAL cash needs would be ?

Of course you could see if they would be wiling ot finance you 100% with no money down with some type of wrap around owner financing. This would enable you to put your funds into the property better securing their mortgage.

Another way to consider going is to OPTION the property for the $150K sales price and then master lease the property from them. Do your improvements and then a year of two down the road with the increased value that presumably increased rents would provide you can once again seek to take out the sellers.

Explore some of these possibilities

Michael Morrongiello

Need advise for financing small apartment building - Posted by Joanne Hawkins

Posted by Joanne Hawkins on January 24, 2000 at 14:50:39:

My husband and I have been looking at a small 13 unit appartment building. The building’s asking price is only 150,000. The problem I’m having is how to find a lender. We have never tried to find financing for this type of property, but I’ve done a cash flow analysis, and don’t see why this property would not do well. The 13 units generate about $4200 in monthly income, after expences about $2600. I would like to find a way to finance with no money down if possible. The appartments need a lot of work, but nothing some paint and carpet wouldn’t fix. I know the owners have about $132,000 tied up in the property. One of the owners of the building is 80 yrs old and looking to get out of the resposibility, the other partner is looking to use his part of the money to help finance his small computer bussiness. I know there is a deal to be made here, and possibly come out with some money for renovations, but we are just too inexperienced to figure it out. Any suggestions would be helpful.

Re: Need advise for financing small apartment building - Posted by L.G. Neal

Posted by L.G. Neal on January 26, 2000 at 15:11:22:

Hi Joanne. Sounds like you have a deal in the making here! The first thing you should do is to review all of the factual information you have and verify the mortgage amount, taxes, and other known expenses. Then, you must become a problem solver! Look at the circumstances of the present owners - one wants to invest capital in a business, the other wants out! What can you do to HELP THEM? Consider the dynamics of your deal closely. Age and cash are very important to the sellers, & little or no money down is important to you. I think one reasonable solution is Michael’s idea about OPTIONING the property. Offer to give the one partner a small option fee - say $1,000, and give the other partner relief from responsibility with the master lease. Remember to try and get the longest option period you can get, and include some sort of protection for your interests if the 80 yr old partner dies before you exercise your option. This solution is not a “no money down” deal, but, if you’re considering new carpet and paint for 13 units, $1,000 shouldn’t be a problem for you. Good Luck!