I've got the property and the Heart.........but not the money (or credit, or experience)

[Truett Aitken]

Good evening. First, thanks to everyone who gets involved on Biggerpockets. I have sent many, many hours on BP learning a ton from the experience of others.

I have found a property that will have more than adequate cash flow, and is also an equity purchase. A few details.

105 Units

Average rents just over $401 per unit

Vacancy rate for the submarket is around 5%

Purchase price of $1,000,000

Repair Estimate $250,000

Currently 50% occupancy due to rehab needs

Snapshot of post rehab estimates (as you can see, no additional income listed. Potential!!!!!)

Gross Annual income..................501,000.00

Vacancy (5%)..............................(25,050.00)

Effective Rent Revenue..............475,950.00

Additional Income........................0.00

Effective Gross Revenue............475,950.00

Operating Expense (50%)...........(237,975.00)

Capital Reserve ($300 per unit)...(31,500.00)

Net operating income...................206,475.00

So, I need 1.3 million. I have no credit and no money.

BUT......

Based on a 10 cap, the property ARV would be ~$2,050,00. 70% LTV on $2,050,000 would be ~$1,435,00. This should be enough to cover a hard money loan plus costs of, worst case scenario, 10 points in fees ($1,300,000+$130,000=$1,430,000.)

BTW - ARV cash flow ~ $7500.00

I know there are still a lot of details missing, but I thought I would hit the high notes and these are conservative numbers to begin with.

Here is my question -

Is it possible?

For me, this is a life changer. I finally committed to doing something I loved doing and this would get me to a place where I could do this full time.

I do have a family member that I can possibly bring in to the deal at some point. He has a much more stable financial history.

Please let me know what you think, and I totally appreciate honesty, so let me have it.

Truett

[Don Konipol]

In today's market, you are going to need a track record AND $300K to put this deal together. Plus, you will need a reserve to pay the interest on the note during the rehab and lease up period (assuming the property is currently operating break even before debt service. This could be 12 months before property is fully stabilized, longer if you need to rehab occupied units when they become vacant.

Assuming you move forward with attempting to purchase this deal, you will need to lay out a good deal of money before you ever get to closing. Unless the seller is totally desperate, a minimum of $20K would be needed as an earnest money deposit. Any lender will require a full MAI appraisal, both as is and stabilized, cost $4000 - $6000. You would also have to find someone with a track record to act as "investor" and others with $300K for equity. You might be able to keep a very small slice of equity (like 5% or less) for putting the deal together.

The sad truth is as you stated, you actually don't bring anything to the table. Unless you are the only one knowing about this property being for sale, it has already been analyzed, shopped, advertised, marketed to buyers with experience, credit and capital. I just don't see any incentive for anyone to invest either equity or debt capital with you when other potential financings offer much more in the way of security, history, experience etc.