12 Unit in Kansas City

[Seth Wilson]

Good Morning,

I have been watching the apartment boards for some time now and have learned a ton, thanks to all that contribute and share their time.

I have been looking for multifamily properties for a couple months now and am in the final stages of negotiations on a 12 unit in a C-class area that is bouncing back due to the recent development spurred by the city and state. Most if not all of the undesirable elements have been removed from this area and is really rebounding, plus the larger economic factors in KC have made multifamily a little hot as of late. Having said all of that the complex is poorly managed, and I am looking for a value play. It is owned by a couple bar owners who have rehabbed the property with ambitions of flipping it. The units are rent ready but they were unfamiliar with income property and hired an incompetent property manager.

Anyway here are the numbers: 12 unit 2bd/1ba

Purchase Price; $235,000

Gross Income (reported); $29,000

Expenses (reported); $8,000

Market Rent; $480-500/mo

4 vacant units

Late Payers in 4 other units

I have personal ambitions of being a developer someday and think that taking on a property like this that will need my guidance would be great. I have done some 'soft marketing' and there is demand for this area and at this price. While the CAP rate is low on this property I am confident that I can fill it up with quality tenants quickly and have started interviewing property managers that specialize in this type of property.

So for my questions;

1. Financing, I have been calling around to traditional lenders but I feel they may not be too interested in such a property due to its poor numbers. So I am looking at HML. Is there anyone that you all may recommend? And what should I look out for or avoid?

2. Re-Financing, I would like to hold the property and take equity out later and cash flow on the deal. I have read that it is about 12-18 months of stabilized management till this can be done, does that check?

3. Section 8, The area would still be subject to a number of interested section 8 tenants. I have started my homework on working with the city but once again is there anything special I need to be aware of going into this?

Long story short I think this would be a great start for me and a profitable deal in the short and long term. Now what I need is for you all to try and burst my bubble, tell me all of the things I don't want to hear and any advice you may have.

Thanks again all!