Can anyone make this property work? Deal or no Deal

Question

So here are the numbers....

• Property sale price is $11M (50 unit built in 2017, 98% occupied, rents on par with market)
• Rental income totals $860K (rents plus all fees and garage rentals)
• Expenses total $240K
• Able to secure a 75% LTV mortgage at 4.85% (30 yr amortized, 7 year then balloon) coming to $522K
• This leaves $100K for the year.

Problem is that i don't have $2.75M laying around (yet :-) ) so I will need to obtain it another way.

So Im looking at this and saying that even if i had ~$3M it wouldnt make sense to do this deal as the cash on cash isnt justified.

Is there a creative strategy that someone can think of that could make this deal work...or even come close????

Ron Fiscus · Answer

Wow, $220,000 per door cost.  This must be a trendy water front property.  No way that’s going to work, I guarantee you if you put something together at those numbers you would be sorry.  Take it from me, I have a 30 unit that keeps me awake at least two nights a week.  Not a pleasant situation to be in.  I’m happy to share my expenses.  I’m no pro like a lot on this site, but I have a fairly good handle on the expenses since I pay them.

Ned Carey · Answer

I am not a commercial guy. i would guess 40-60% would be the range for multi family. That is a pretty big range and not very helpful. The 60% number came from @Joel Owens as common if the owner pays utilities.  I figure 50%  for SFHs which works in my market.

Dave S. · Answer

@Ned Carey Thanks for the reply. I was questioning the expenses too. Most are listed out as "estimated", i guess because the property is that new. What % expenses would you be expecting to see with this size property?

Ned Carey · Answer

I dont see a deal here even at the stated numbers. I thnk the real numbesr aren't close to that good.  Are the expenses really that low?  that is a 27% expense ratio.