what price should I offer ? - Posted by brian

Posted by Galina on September 08, 2003 at 14:28:47:

Hi Don,
could you email me also your “simple spreadsheet”.
thank you very much

what price should I offer ? - Posted by brian

Posted by brian on August 28, 2003 at 22:16:57:

First time commercial investor. Looked a 18 units apartment building sale by owner. Tatol income $140018, total expenses $53013, so net operating income is $87005, and the asking price is $1,100,000.

My question is how do we konw the asking price $1,100,000 is the fair market value. Also what do you think is a good starting price to offer to the owner.

What kind of mortgage term is better if I have $120,000 for down payment and want 10% return for my investment, or any zero down method will bring a positive cash flow.

thank you .


Re: what price should I offer ? - Posted by Don Dion

Posted by Don Dion on August 29, 2003 at 09:49:09:

Ok first off I dont really have enough numbers to input this building for you. But I did have enough to do a rough spreadsheet to back into min debt ratio to get to the purchase price. I can email the simple spreadsheet to you if you use excel.

Here is how it would be figured: Purchase price * 80% for a first mortgage from a bank. I used a rate of 7.35% and a 20yr amort. Second from the seller same terms. On the $1.1 mil purchase you end up with a debt service of 92.89% and you need 120% so your well short. I reduced the purchase price until I was up to 120.02% and the number comes out to $878,500. This number will be higher if you can get 25yr or 30yr amort from your lender. I dont handle your state so you will have to make some calls asking about rate and amort and input them into the spreadsheet to zero into what your max purchase price can be given your downpayment.