10 unit value add opportunity

[Mark Douglas]

I'm running the numbers on this, and I'm getting the feeling I might be over-leveraged (not a good feeling!)  Here's what I'm looking at:

10 units

9 2bd & 1 1bd

Offer price - $125k

*Currently vacant*

Needs roughly $60-80k in work

- There is only sheetrock, plumbing, electric, and subflooring

- I'll need flooring, doors, trim, casing, paint, appliances, cabinets/countertops, light fixtures, duct work for existing HVAC units, other misc. items

I'm in the process of getting a few bids for the work, but it'll be at least $60k easily.

Here's what I'm thinking in the way of financing:

20-25% down, commercial loan (if they'll loan on a vacant property needing this much work..????)

- Mortgage ~ $1,200/mo

Line of credit up to $50k for the rehab, the balance will be out of pocket funds

- LOC repayment ~ $300/mo (interest only, 5 yr balloon)

2 bd rents conservatively, $400/mo * 9 = $3,600/mo

1 bd rent conservatively, $325/mo * 1 = $325/mo

Gross rents ~ $3,925

Finance expenses ~ $1,500/mo

Gross profit ~ $2,425/mo

Using 50% expense rule ----->  $1,962.50/mo cash flow

The town has a population of 65k.  Most of the jobs are tied to a large factory, the school system, etc.

Property SHOULD be worth at least $300k after rehab is finished.

My thought was to refinance, pull cash out to pay off the $50k line of credit, and recover as much of the down payment as possible.

Am I spreading myself too thin, trying to pull financing together?

How do lenders feel about vacant properties??