FIrst Commercial Deal - 8 unitFIrst Commercial Deal

Investment Info:

Large multi-family (5+ units) buy & hold investment in Milwaukee.

Purchase price: $245,000
Cash invested: $35,000

Offer price = $245k
Seller paid $5k in closing costs
Purchase price = $240k
Down payment = $35k
8 unit x $600 = $4800 monthly rents
Commercial Loan is a ballon loan for $196k
Interest rate = 3.99% for 5 yrs balloon. Will refinance probably in the next 2 to 3 years
Monthly mortgage payment = $986
Monthly expenses = $2,052
Total monthly expenses = 3,038
Monthly cash flow = $4800 - $3,038 = $1,762
NOI = $28,176
CoC ROI = 31.67
Pro Forma Cap & Purchase Cap = 11.5%

What made you interested in investing in this type of deal?

Rents were avg $575, monthly income was calculating around $4,600 and the selling price was $265k. I knew that there needed to be improvements to the building and apartments, but knew it would be worth it based on the current market rent conditions.

How did you find this deal and how did you negotiate it?

On MLS. The deal was on the market for more than 200+ days. The agent was not serving their client properly, but I was able to find out their win-win situation and offer that price. Which ended up being $20k less than their asking price.

How did you finance this deal?

Commercial loan

How did you add value to the deal?

Improving common areas, removing bad and non paying tenants, improve management, and rehab vacant units. Rents were $575 and now I am renting between $700 - $800 an unit.

What was the outcome?

Buy and hold, but turning it into a syndication. Cash flow is well above what I expected due to the commercial loan. Mortgage is $946 on an 8 unit building. Game changer!!!

Lessons learned? Challenges?

When you can improve the building, management, and find the right financial tools then you will have a homerun.