Low NOI- .53 DSCR

[Matt B.]

I'm looking at an off market 5 unit in the Chicagoland suburbs with a very low NOI, the landlord owns the property free and clear and has not raised rents in years, I've offered seller financing and they do not want to go down that road.

I could purchase for $475,000-$500,000, the property is easily worth this amount. The In place NOI is only $19,460 or a .53 DSCR, based off the .53 DSCR a couple banks will only allow a $180,000 loan. The min DSCR amount I could find is 1.10.

With out offering a massive down payment how in the world can I make this work?

Thanks,

Matt

[Nate Herndon]

@Matt B. one answer to this would be to purchase on a bridge loan for 75-80% LTC, stabilize the rents to where they ought to be, then refinance into a DSCR product once you have that 1.00-1.20+ ratio. There is a 30-year 'no DSCR' product available as well at 75% LTC, but rate would be 11-11.5%. You could buy the prepay down to 1 year and essentially have a bridge rate on a 30-year product...refinance when you're ready.

Also, what expenses are you factoring for when you speak of the 0.53 DSCR? Just principal, interest, taxes and insurance? I utilize some programs for my client's 5-8 unit properties that only factor for PITI as expenses.