MFR valuation & financing Qs

[Pete M.]

All,

Looking at my first foray into commercial multifamily (previously done SFR & small multi BRRRRs). We've looking to essentially do the same (BRRRR), just on a bigger scale. How are you structuring your financing to do initial purchase plus rehab? I have hard money lenders who will loan for purchase + rehab, but rates are high enough that they'd basically be a non-starter for a 12-18 mo repositioning. Cheaper rates can be had through conventional loans, but those won't fund rehab, and many lenders won't do second position loans. Should I just look for a local lender who will do purchase + rehab in one, or what am I missing?

On valuation, how would you assume valuation is done for an 8-unit that's comprised of two duplexes and a quad on a single parcel? Strictly based on income-approach (NOI divided by cap, minus major deferred items), or are comps also looked at?

What's your rule of thumb methodology for a quick valuation?  I've heard take annualized rent, subtract 50% for expenses and vacancy, and then divide by going cap rate.  Obviously this would be a quick-and-dirty estimation, not to be confused with gathering the T-12s to establish a true as-is.

Thanks.

[Dallon Schultz]

@Pete M. in our experience this can be a difficult area to work in if you don't have the down payment and reno costs up front. You could possibly look to bringing on an equity partner to bring the reno costs and up front costs and figure out a split and JV on it.

As far as your valuation, I have a friend that's a commercial appraiser and yes they weigh heavily on the income approach but they also consider comps to justify their valuation.