structuring 12 unit deal - Posted by jeff

Posted by Ed Garcia on March 01, 2001 at 24:54:17:

Jeff,

Even though you have given us some information, it’s not enough for us to give you an intelligent answer.
Here is the standard questions I have to have answered when I start working a multiple unit deal.

(1) Describe The Units and the surrounding area?
(2) How old are the units?
(3) What’s the unit mix ( how many 1 br. 2 br etc)
(4) What’s the vacancy factor in the area?
(5) What is the gross income of the units?
(6) What is the vacancy of the units?
(7) What is the NOI?
(8) What are market rents in the area?
(9) Are there any other Units in the area for sale?
(10) If so at what Price?
(11) What are the going Cap rates in the area on multiple units?
(12) Have any other Units in the area recently sold?
(13) If so at what price?
(14) How much does the seller owe on the units?
(15) If there is a loan, is it assumable?
(16) Will the seller carry a second?
(17) Is there any differed maintenance?
(18) If so, estimated cost of maintenance?
(19) How’s your credit?

Jeff this is just the beginning. In order to properly analyze a deal, here’s where to start. I meet with a bank 10 a.m. Friday morning for one of my workshop attendees who is trying to purchase 18 units at 100% financing including seller carry-back. So yes it can be done.
There is no one formula that works in every situation, with every lender. It’s a matter of knowing (A) what the lender requires, (B) what you might give them as a compensating factor incase you can’t provide exactly what they want. (C) It’s a matter of what you have to work with, meaning equity, cash flow, structuring of the deal between buyer and seller, HOW STRONG IS THE DEAL, HOW STRONG IS THE BUYER, must have between a 1.2 and a 1.3 debt coverage ratio, and the list goes on.

Ed Garcia

structuring 12 unit deal - Posted by jeff

Posted by jeff on February 28, 2001 at 19:36:27:

Im looking at a 12 unit building they were built as condos but went bankrupt in 1988 and are now just 1 apartment building i own a condo in the same type building across the street so my familar with the area this building is fully rented at market rates 82800 a year taxes and expenses 16600. I have 20000 cash and lines of credit total 22000 i own 2 condos with pos cash of 600 month and the house i live in costs 700 month i dont have anough equity to borrow against have no other debt and make 50000 a year . MY QUESTION IS how can i buy this building the owner is 54 and wants out and has a mortage on the property my banker tells me even if seller holds second for downpayment i have to have 20% my money in deal and 6 months reserve funds