Help with construction of an offer...

[James Starks]

Hello everyone. I am a new member and this is my first post.

I am considering making an offer on a self service car wash property in my local market. The property was originally listed at $595K and has been dropped a couple of times to $295K. The listing agent informed me that the bank has taken possession of the property within the last week.

The NOI is approximately $30K; includes a lease of one bay to an emmissions facility. I believe the value of the property to be $225-$300 less $25-$50 in repairs, maintenance,and updates. I realize these are wide ranges. As a first time investor, I am hoping to get some help in constructing a deal.

I want to offer $225K with $50K cash out at closing; netting the bank $175K. However, I don't want to go in so low that the bank doesn't even counter if they chose not to accept.

The offer would be subject to current bank approval of financing with no money down.

Should I wait and see if the bank reprices the listing?

I figure the property has been on the market for quite some time and no bank wants to be in the business of keeping up a cash wash.

[Jon Holdman]

Have you tried actually speaking with the bank about the property? A quick discussion would give you an idea of where you stand.

Its extremely unlikely you are going to get into this deal with nothing out of pocket. Plan on 30% of your purchase price for a down payment and then whatever it costs to fix the place up out of pocket. If that's a non-starter for you, then you probably aren't going to do this deal. Getting any sort of commercial loan is very difficult right now. Banks are going to be very conservative in their valuations and will want to see you have some real skin in the game. I'm in on a mini-storage deal we've been trying to refi for some time. Even with a solid operating history, this is very difficult. And it appears its going to be a cash-in refi at best.

The selling bank may not even want to lend against this property. They may have had enough pain from it and want to move on. Or, they may be out of the business of doing loans like this at all. Give them a call and discuss the property with them.

The price part of your proposal isn't outlandish. The loan part is.