18 Unit Deal with Cap Rate @ 12%

[Russell Alton]

I am currently eyeing a deal that has 18 units, 5 garages and what looks to be a great rate of return.

Year	Rents
1.	$102,782	$24,321	$41,500	$36,962	24.64%	$121,453	$80,253	-21.86%
2.	$105,866	$24,321	$42,745	$38,800	25.87%	$143,652	$101,216	9.72%
3.	$109,042	$24,321	$44,027	$40,694	27.13%	$166,625	$122,916	20.80%
4.	$112,313	$24,321	$45,348	$42,644	28.43%	$190,400	$145,379	25.63%
5.	$115,682	$24,321	$46,709	$44,653	29.77%	$215,005	$168,634	27.98%

I need some help to pull the deal together, I have great W2 income and great credit, but I lack the 20% down to make it happen. Any thoughts on what I should do or who I should talk to about the down or any other creative ways to get this property under contract?

Thanks for the help!

Russ

[Joshua Nicholas]

Hey bud,

You said something disconcerting, "it sounds really good".

Have you not taken a look yet?

That's step 1. Go to IREM.org, find some property managers in your area, look for the ones with the best reputation and have one of them walk the property and run the numbers with you.

If the numbers check out, then I would suggest talking with friends, family and your real estate attorney for the money. $125k + $50k + closing costs isn't as daunting as it seems, you definitely can raise this for your first deal. You could also fund this with your IRA if you have that.

And not to be a pessimist but a 12% cap rate is likely a fantasy # based on no repairs, no management fees, no vacancy or credit loss, no reserve allocation, etc. I would triple check your numbers before believing any property NOT in a war zone has a cap rate above 8% today.