What would you do? To make this deal work.... - Posted by Finnix

Posted by Finnix on January 29, 2000 at 04:37:34:

Thanks for taking the time to reply…
I will find out all incoming and out going payments
on wednesday…

What I was really after on this was, how would the
experts close this deal…

Owner is willing to carry note and wait 6 mths for refinancing on my part and he stated he is serious
in selling… Thats what I have learned so far.

I am thinking of offering a lease purchase or
agreement for sale. If I go with agreement purchase
I would have to pay the 2% tax to government right
away and thats close to $26,000.

In a nutshell I have found a person who wants to sell
and I want to buy, and doing so with little money down
is the tricky part for me…

thanks again and sorry if I rambled on…

What would you do? To make this deal work… - Posted by Finnix

Posted by Finnix on January 28, 2000 at 17:54:03:

Hello all,

I ran into this ad while looking through local paper…
30 UNIT apt bldg, XXXXX st XXXXX,XXXXX
asking $1,399,000. your city Tel: xxx-xxxx…

I phoned the number on the ad and did a little f.a.q
Why are you selling - Want to pull equity out for new construction.
Is there a current mortgage - $880,000
For the monthly expenses, I have to wait until next wednesday.
As far as what it is worth … I think $1.5 million.
Willing to offer $1.3 million…

When I was talking to the owner. I asked him point blank questions…
Would holding a note be a problem. He said no problem.
Would you be able to hold financing for 6 mths again no problem…

This is all I know for now… for rent I think they are
all 1 bdroom apts, renting for $600 each that is average rent for the area.

I should also mention Im in Canada. Current rate is 8.55% for 5 yr term. 7.3% for 6mth term.

I am hoping some of the deal makers here can help me out
on this and or share with me what they would do to make this deal…

Thank you.

Re: What would you do? To make this deal work… - Posted by phil fernandez

Posted by phil fernandez on January 29, 2000 at 08:16:36:

Taking David’s numbers below, all you could pay for the property would be about $975,000 to achieve a cap rate of 12%. In my world anything under a cap of 12% is a marginal deal.

You will have to do your due diligence and get and verify all of the expenses including a reserve for replacement.

Another question. How experienced are you with a property of this size.

Re: What would you do? To make this deal work… - Posted by David Alexander

Posted by David Alexander on January 28, 2000 at 22:44:10:

I’m no expert on these but gonna take a shot at it.

30 times 600 is 18k/month times 12, gives you 216k a year gross income times 90% to give you a 10% vacancy factor which comes out to 194,400.

194,400 times 60% gives you 116,640 assuming you can operate this thing at 40% expenses. (dont know what apartments expense should be, possibly more)

116,640/ 1,300,000 gives you a cap of .89(9%) or in my book no deal.

David Alexander

Re: What would you do? To make this deal work… - Posted by JohnWe (NoCA)

Posted by JohnWe (NoCA) on January 28, 2000 at 20:07:06:

Check out this article:

http://www.creonline.com/mm_28.htm

Re: What would you do? To make this deal work… - Posted by Finnix

Posted by Finnix on January 29, 2000 at 13:52:32:

Thank you Phil for taking the time to reply,

I dont think the owner will take $975,000.
He owes $880,000 and $1,500,000 for retail price
is not out of line.

As for experience in this kind of sized property.
None.

To date I have not done any deals. I have one in the
works right now for 1bedroom apt. But, the owner
turned down my lease/option. She is leaving the country for good and wants all debts paid… I have a
buyer in the wings for it. He is at the bank now applying for a pre approval mortgage… So I will
have to gain control over the apt in some way. Dont know which way is best, yet.