84 Unit Complex- How would you structure the deal?

[Canesha Edwards]

Good morning all,

I have a unique opportunity with an 84 unit complex in Atlanta. I received a call from one of owners of the complex. The group has owned the complex for 20+ years, and while they aren’t in a hurry to sell, I get the sense that if made the right offer, the would happily sell. The owners are willing to sit down and talk with me but only once I prove I’m a qualified buyer and can get the deal done.

Here’s where the problem comes I’ve never done a deal like this and I don’t have the capital for the down payment. I would like to bring on equity investors to raise the down payment. I was thinking of a 70/30 split. Does that seem fair? I will manage the property instead of outsourcing to a PM. The property is 15 minutes from my house. I’ve reached out to an SEC lawyer to see my options are here and if needed I have the funds to cover all SEC associated fees.

I understand all the odds are pretty much stacked against me but passing this deal off to another investor for a fee isn’t an option I’m considering right now. I’m looking for solutions to my problems to get the deal done.

All feedback is greatly appreciated.

Canesha

[Michael Ealy]

Originally posted by @Trent Chance:

@Canesha Edwards I'd still take an acquisition fee if I were you. I think it's standard and shouldn't affect your equity.

Maybe see if @Michael Ealy has any ideas for you to find a partner or on structure

 Thanks Trent for the mention.

Canesha, since you can't qualify as a buyer by yourself, be HONEST with the seller and tell him that you can't. However, tell him that you can line up high networth individuals you know who can partner with you on this deal.

Ask him basic things that will give you an idea whether this deal makes sense or not. Ask him the average rent per unit. Research the area (is it A, B, C, D, or F). Ask him old is the building (or you can search public records to find out when the building was built). Based on that, you can have an idea whether the deal is a good one or a bad one based on his asking price.

Once you know the deal has potential, approach the other high networth individuals you're talking about. 

Are these high networth people experienced apartment investors? Or are they just there to put up the money? As @John Casmon and @Greg Dickerson point out, in order for you to even get bank financing on this, they will require 2 things which you don't have (or actually 3):

1. If you want to borrow $1 Million, you need to have a net worth of $1 MILLION

2. You need apartment investing experience (specially since we're talking 84 units here)

3. Banks will also have some LIQUIDITY requirements. Depending on the lending institution you talk to, they will require 6 months of mortgage payments + 20% (or sometimes 25%) down as cash in a bank account you control

In other words, you need to structure it this way:

A. You need an experienced apartment investor as partner who can be on the loan - likely 50% partner

B. You need 1 or 2 money partner - likely 40% partner

C. You - 10% partner

Makes sense?