Looking for funding - 18 apartments building

[Anya Swanson]

I am seeking a loan or a joint venture partner to convert a school building into an 18-unit apartment complex. The project requires a $350,000 down payment (with the seller financing $500,000) and approximately $450,000 for rehabilitation, totaling about $1,350,000. The anticipated after-repair value is $1,700,000, with an expected monthly cash flow of $8,500. I will be happy to discuss this opportunity in detail and can provide all the information - please contact me if this sounds interesting to you

[Stuart Udis]

@Anya Swanson A few things jump out. First, the  hard costs are way too low for an 18 unit residential conversion.  I don’t see how you could possibly convert a school building for $25K/unit. Your MEP’s alone may surpass that. Especially if the building has to be sprinklered which is required in many municipalities where a use change is enacted. Also where are carrying costs and loan interest built into the budget? Are there fire rating assemblies and STC ratings you must meet? Many fail to account for this but adds considerable costs not to mention 18 kitchens and appliance packages which is a big part of your budget. I’m preparing to convert a school building into 12 units in Philadelphia that will also feature a 9 unit addition and the  converted units will cost $95k-$105k per unit and that’s with reduced construction management fees because I’m self performing through my construction company. 

Less relevant because your costs appear to be off but your capital stack is not well thought out. If the project truly cost $1.7M, there should be lenders out there willing to finance 80% LTC meaning your cash requirement would be $350K. I don’t see how a construction lender will come in to the picture when you already have seller financing. Someone has to be second position and that doesn’t normally fly with a construction lenders involvement. Therefore the seller financing in this case actually restricts your financing options and doesn’t reduce your equity whatsoever. In fact may actually force your hand towards additional equity. Remember bank debt is generally considered the cheapest form of capital and you want to position yourself to use debt and not equity. Here you’re frustrating that possibility.