Skip to content
×
Try PRO Free Today!
BiggerPockets Pro offers you a comprehensive suite of tools and resources
Market and Deal Finder Tools
Deal Analysis Calculators
Property Management Software
Exclusive discounts to Home Depot, RentRedi, and more
$0
7 days free
$828/yr or $69/mo when billed monthly.
$390/yr or $32.5/mo when billed annually.
7 days free. Cancel anytime.
Already a Pro Member? Sign in here

Join Over 3 Million Real Estate Investors

Create a free BiggerPockets account to comment, participate, and connect with over 3 million real estate investors.
Use your real name
By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.
The community here is like my own little personal real estate army that I can depend upon to help me through ANY problems I come across.
Multi-Family and Apartment Investing
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

Updated almost 6 years ago on . Most recent reply

User Stats

130
Posts
116
Votes
Rich Somers
  • Investor
  • San Diego, CA
116
Votes |
130
Posts

I have a 5 unit under contract and have inspection questions!

Rich Somers
  • Investor
  • San Diego, CA
Posted

So I currently have a 5 unit Multi family under contract in Louisville, Ky with a 21 day inspection contingency period.  The building is over 100 years old, seems to have somewhat updated plumbing & electrical and seller claims roof was replaced in 2017.  My question is this:  In addition to just the typical home inspection & pest inspection, would it be wise to have a HVAC specialist, plumber, electrician, and roofer come out to dig a little bit more thoroughly into this property?   I plan on flying out there to be present during this inspection, and also intend to have a couple contractors out to the property to give me itemized estimates for the rehab that I intend to do.  To give you guys a better idea of the rehab:  I plan on doing mostly cosmetic items (new cabinets, counter tops, shower, vanity, flooring, appliances, ect.), along with cleaning out the basement to add coin op laundry, additional storage spaces, ect.  

Thanks guys, I look forward to hearing your responses! 

Most Popular Reply

User Stats

29
Posts
11
Votes
Replied

Commercial lenders do not have seasoning periods, I work for a large bank and do commercial loans.   2% early prepay for 3 years is actually reasonable.  Some lenders do a 5-4-3-2-1 structure: 5% in year 1, 4% in year 2 and so on.  Your lender will most likely not waive the prepay, but ask them for "customary yield protection" instead of the early prepay they mentioned.  If rates go down, you pay the change in the rate x balance x time remaining on the note (it is a very long formula that I can't really explain) but basically if rates drop you will have a penalty, if rates go up then you do not have a penalty.  The bank wants to protect its interest income if rates drop, if rates go up they are happy for the early payoff because they can lend money at a higher rate.

Banks lend on multifamily based on Debt Service Coverage of 1.25x. when building is stabilized. Gross rent less vacancy (5%), less reserve budget (5%) less property management fee (5%) minus all operating expenses = Net Operating Income. Operating expenses are anything it takes to run the property: taxes, insurance, landscaping, utilities, repairs, legal fees, marketing fees, etc. Put NOI in the numerator and divide by Annual Debt Service, must be greater than 1.25x.

Costs for repairs really depend on how much asbestos you have (you might not have any) and cost to replace K&T wiring (depends if the wiring is accessible from a drop ceiling, in an exposed basement, open attic, or behind plaster walls that will require some cutting and patching.  On older buildings, I pop off the electrical plates when I look at a building and look for K&T.  It looks like thick brown string.

Loading replies...