5 Unit Deal - Owner will only accept Cash/Hard Money

[Jim Hiler]

I have a financing question about regarding a 5 unit property in South Florida that I'm analyzing. The property consists of 4 structures - 2 duplexes, an SFR and 2 car garage, and has 3/4 of acre.

Here is the link to my analysis using the BP calc assuming a $455,000 purchase price and below is quick summary.

https://www.biggerpockets.com/calculators/shared/260799/874435c9-b77f-4f96-a3de-90be11c4cbba

The asking price is $475,000, Assumed purchase $455,000.

I've assumed $30,000 in repairs as a place holder (TBD)

Current Rents total - $4,700 + an additional $75 in income from laundry machines _ According to listing broker.

Taxes are $5,868 (verified)

Insurance $4,500

When factoring in other expenses - landscape maintenance, water, elec, vacancy, repairs, cap ex and PM I end up with $610 in cash flow. Not great but not bad. My purchase cap rate comes out at 7.4% and COC return 4.85. These numbers are not great but for this area I think they're decent.

Also I know that I bump rents in at least 2 of the units, and rent out the garages separate, and maybe even rent out some of the land for boat storage etc.

Also the icing on the cake is my long term strategy, which would be to tear down the existing SFH and garage and build at least 4 more 2/1 units. Now I have an 8 unit property.

That being said the owner will only accept cash or hard money. When I factor in using hard money to buy this and assume it will take 6 mons to refinance it minimum the deal doesn't look good.

I'm looking for ideas, suggestions, mistakes that I made, things I missed in my calcs? Any help is much appreciated. How can I take down this deal?

[Hadar Orkibi]

@Jim Hiler, i do not know the location so cant comment if the returns are reasonable in this market. Maybe for Miami 4.85% COC is common but for me, personally, is way to low.

Few side comments: you allow for 25 years amortization, did you confirm this with your lender? 

most local banks will try to have you on 20 years which changes the numbers and cash-flow. 

Re laundry money, i never include this in my calculation - i simply look at it as bonus income. 

your vacancy at 3% sounds low, again not knowing the location its hard to sell. 5% would be my lower estimate in high demand location and proven 100% occupancy in the last 2-3 years.

Repairs and maintenance, unless the property was recently renovated top to bottom or you would renew the large items like roofs, HVAC, water heaters etc 5% and 4$ is tight. 

I like to work with 7% maintenance and 7% Capex.

Property Management: is 7% the going rate in this market? do they charge any extras?

I allow for 10% as this is the standard in my market. could be negotiable if you have more units. 

Landscaping $100 to low?

Pest control?

* Make sure the zoning allow for the Icing on the cake plan.

Did you ask the broker why does the seller want only cash or hard money? that's sounds strange... what is the reason behind this??