Posted by JD on March 15, 2000 at 09:44:44:
You also need to know what the property taxes and other expenses are but, if you dont have the cash and credit to get 8% money from a Bank you shouldn’t waste your time looking for buy and hold apartment rentals. IMHO
What’s The Call? - Posted by Tony Natoli
Posted by Tony Natoli on March 15, 2000 at 06:43:36:
Ok here’s the play:
The property is an apartment complex. It has 31 units. 19 2BR and 12 1BR. The 2BR gets 395/mo and the 1BR gets 295/mo. The complex has a 96% occupancy rate. It is in a decent location and the property is in good shape. They are asking $825,000 but I think that its a bit high. It also comes with a 1,700 sq ft mgr’s home that is close by. He says that he’s not into owner financing right now. He’s rather cash out.
You guys that have experience in apartments, I could use some advice on this one. What else do I need to know and where do I go from here? Should I look into hard money or alternative financing?
What’s the call?
Pass. - Posted by ray@lcorn
Posted by ray@lcorn on March 15, 2000 at 15:21:24:
Reason:
$127,238 Income
$ 50,895 Est. Expense @ 40%
$ 76,343 NOI
$825,000 Price
$-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.
ray
*I hit the house low because if it is adjacent to an apartment complex it probably isn’t a showplace.