Pass. - Posted by ray@lcorn
Posted by ray@lcorn on March 15, 2000 at 15:21:24:
$ 50,895 Est. Expense @ 40%
$ 76,343 NOI
$-75,000 House value?*
$750,000 net price
$76,343/$750,000 = 10% cap or cash-on-cash return if all cash = no deal by my criteria
If conventional finance:
Sell house, 75% loan on $750T $562,500 @9.5% 20 year am, 25% ($187,500) down = $62,900 Debt Service- cash flow= $13,443 = 7% cash on cash return
On a straight cash/conventional finance deal: No upside, no seller motivation, no terms, (better returns on CD’s) = no deal.
Now if your seller were to get motivated, be willing to give some terms and get real on the price, (say at an 11.5-12% cap, sale price ~$650T + house, then you may be able to tweak the thing into a decent deal. Playing with the house value may also make a difference.
Hard money or alternative (private?) financing only works when the price is low enough to make the returns work. As it is, higher priced money just cuts into the already slim cash flow.
*I hit the house low because if it is adjacent to an apartment complex it probably isn’t a showplace.