Posted by Steve G(ga) on March 07, 2000 at 24:17:33:
Actually, the deal was for two quads. Total price 341k, total commision, $31k. I would pay him 100 per month and at the end of 5 years, the entire 31k is due or refinanced by broker with interest included. In 5 years, a refinance would pay off this commision.
By the way, in theory this was going to work. It really didn’t wash for cash flow though. In order to make it worth while, I would have needed at least 50k down with no payment attached. As it stands, the deal was lost because I would be $120.00 negative each month with no maintenance allocation in the budget. With 8 units 15 years old, if something major broke, I’d have no way to cover it.
Found a 4-plex for sale for 171k appraised at 210k. Offer of 161k was accepted.
75% 1st mtg 121k.
15% 2nd mtg 25k
diference of 15k
Broker to loan 8.6k commision w/0% interest 5 year balloon secured by 3rd. I am without other financial resources. (my own home is new with no equity) Question… other than credit cards at high %, where else can I look for remaining 7k down? This property has NOI of 165.00 per month. Is it worth all the paperwork? Is this what ya call skinny? lol
Who appraised it? If it is this tight on cash flow at 161K, it shouldn’t appraise that high. Or was it a Realtor saying it’s worth 210K(which means it is total garbage)? If it is listed at 175K and hasn’t sold, then it is not worth 210K or 175K. As part of your due diligence, you need to see operating statements for last year or more. Find something wrong in these (especially if there was no allowance for inflation) then see if you can negotiate at a price where you can make money.
Re: O.K. Try this one out… - Posted by Bill K.- FL
Posted by Bill K.- FL on March 03, 2000 at 08:18:14:
Hi Steven,
The 165 you refer to is not NOI but cash flow after debt service on your three mortgages right? Otherwise you would have a huge negative cf each month. Whose figures are you using? If it is the broker’s watch out.They most surely understated the expenses and may not have used any vacancy/collection loss %. What about deferred maintainence. How old are appliances,roof, carpet,heating and cooling units? If the place is half full and they are using 100% occupancy in their figures what good are they? Run the numbers with all expenses and current rent and take into account any repairs/replacement anticipated in the first year to give you a better idea about this deal.
Posted by CindyS-De on March 03, 2000 at 08:09:47:
I would really look at this one closely. You don’t give any interest rates and if you are going through a broker they will look very close at where your 7k came from. If you are planning on using a credit card you need to get the money and let it season for a couple of months. Also a NOI of only 165 on a 4plex sounds like an alligator waiting to bite you on the butt. Unless of course you already have figured in a good bit for maintenance issues.
Posted by Steve (ga) on March 04, 2000 at 19:49:00:
Being new at this, I mis-stated. I pay him 100.00 per month for 5 years. I tried no payment, but he wanted something. Technically, not sure if this is considered “interest” but he makes 6000 just for making me the loan. His note is secured by a 3rd, so it’s low risk I think.
Posted by Steve (ga) on March 03, 2000 at 09:50:36:
The 165 is cash flow after ALL debt service, however, I intentionally didn’t include maintenance costs which I planned to do myself… The place was built in 86 so I was not anticipating repairs. The place is, and will continue to be, fully occupied. (my own experience - in great location, great rental history) What I did not factor in is that every penny I can get my hands on for repair (if, and most likely WHEN needed), will be used for purchase. Kinda almost set a trap for myself. Long term good buy, short term good bye… Thanx again…
Posted by Steve (GA) on March 03, 2000 at 09:34:57:
Thanx for input… I’m a gonna back away from this one based on cash flow versus maintenance allocation. In 5 years this could surely be a good deal (with increases in rent) however, the lack of major cash flow and the possibility of major maintenance expense (with all my money, borrowed and cash tied up in this deal) satisfies me to leave it alone for now… Again, Thanx…