Possibility of a Creative Deal - maybe with the right approach

[Brad Gordner]

So I have 3 deals under my belt..a 3 unit, 6 unit, & a 9 unit. Currently working on financing the rehab of an 11 unit. So I'm getting decently familiar with commercial lending.

But this one building has been staring me in the face for a few years now. It's a 14 unit. I'm thinking it's time for a creative real estate deal. My first one.

He is asking $300,000/$21,429 per unit. It is currently at 100% occupancy 14 @ $5,695 p/ month $68,340 p/ year with expenses of $1,312 p/ month $15,740 p/ year:

Income from washer and dryer (only one of each currently working) about $100 a month.
Total Monthly Income: $5695 or $68,340.
Expenses are as follows per the owner:
water and sewer about $4800-5000 a year.
Garbage is $90 a month or about $1100 a year.
Insurance would depend on who your buyer uses but the current owner uses Ron Enders and his cost is $2000 yr
Common electric is about $100 a month or $1200 a year.
Gas meter for dryers is about $70 a month or $840 year.
Taxes are $5,600 a year
Total yearly expenses are approximately $15,740

Now that's his cost. If I were to buy it the mortgage amount would go up, I'd be at around or, most likely, over $3,500 for insurance. I put it as $5,000 on my pro-forma (our 6 unit is $2,900, 9 unit is $3,800, and 3 unit is $1,300....all replacement cost income protection). I also have Professional Management as well. It cash-flows well even with 12% going to the property managers.

So that's the meat and bones of the building. Here's the situation:

It's been on the market for nearly 3 years...owner started out to high ($500k). I've watched it drop $200k to where it's at now...which is my buying zone.

Owner is a teacher and coaches as well. Managing the 14 unit is a job by itself and he is out of time. His realtor said it best "Time...when you buy 14 unit...u buy a part time job. He coaches and teaches ...he just really doesn't have the time for it. He makes good money, so he's OK if it doesn't sell, but if he can sell it that works too."

So there it was. Could it be that I could be the one to solve this guys problem? His lack of time? Why not? I have property managers already....the numbers work for me already.

But what creative path to take? The owner has alot of equity in the building but the mortgage is sure to be above $160,000 so that would eliminate just the standard 'subject to'. I've read up on all the methods but can't decide on a wrap or lease option. I would want the lease option to be over 3 years so that would trigger the DOS clause just as the wrap might. We would be in a position to refinance if need be but I'd much rather not at this point.

I haven't talked at all about possibly doing a creative deal with the owner or realtor. I want to have my plan of attack well thought out first.

Here is my initial thoughts (please feel free to dissect):

Ask if they would be open to sellign subject to the existing financing with the seller holding a second. IF NO,

Ask if we could lease the whole building from them with an option to buy at $300,000 for 3-? years. *how do I figure out what that lease amount might be?*

Any thoughts are much appreciated.