Deal or No Deal ?

[Ronald H.]

This is my first Property Analysis so any suggestions would be welcomed.

I am using IPWare version 3.3.4 to do this. Anyone know of a good Property Analysis software pkg.

I have been speaking with a Seller who has a 16 unit property in a tough city. He told me that he wants to sell due to relocation. He would sell with an Assumable Mortgage of $663,000.00 and $330,000.00 in cash. He needs all the cash and will not take back a second.

Lot Size: 4,743 Sq. Ft.
Lvg Space 18,000 Sq. Ft.

I do not know whether the Mortgage is a Qualifying or Non-qualifying assumable yet. $993,000.00 total of what he is proposing.

When I asked him what his Mortgage payment is he says it is $5,344.00 for a 30 Year amortized fixed loan at 6.51%. Yet, when I use a Mortgage calculator I get a payment of $4,195.00

Why the there such a difference? I don't know why this is! He has owned the property for 13 years.

I tried getting the Mortgage info from the towns website but it did not work due to Technical reasons.

He says the Loan is 10 years renewable, 8 years left. I have NO CLUE of what this means. I asked him and I still do not understand this.

Below, I have figured everything with his quoted Mortgage Payment of $5,344.00 per month.

Property Details as best as I have them.
109 Year old with updates but I have not seen. Four stories with an elevator. Age of elevator unknown.

12 - 2 bedroom apts $785.00 monthly

02 - 1 bedroom apts $685.00 monthly

02 Stores that pay gross monthly rent of $1,050.00 each.

Gross Annual Income $154,680.00 divided by sq. ft. for $19.33 per sq. ft.

Annual Taxes last year $10,620.60 Verified with the town. I asked if they would be going up this year but they did not tell me.

Annual Mortgage Payment $64,128.00

Mortgage and Tax Total of $74,748.60

Insurance of $7,200.00 for a PITI of $81,948.60

I figure Property Management in at 10% of Gross Income or $15,468.00 This is the figure I got from a couple of Real Estate websites.

$20,000.00 annually for 1st 2 yrs. for Reserves.

I am deducting for a Vacancy Rate of 5% for $7,860.00 annual loss.

Annual Water/Sewer of $10,800.00

Annual Trash Pickup $4,600.00 I am using an estimate from another 16 unit within 1 mile for this figure.

Annual Electric Service $5,400.00 or $450.00 per mo.

Annual Pest Control of $1,200.00

Legal and Accounting $2,150.00

Elevator Mantenance $1,200.00 verified but condition of elevator is unknown at this point.

Snow removal of sidewalk $725.00

Advertising for 21 days in the Newspapers $397.05 Verified.

Licenses for Rental Property $240.00

I am getting Total Annual Expenses of $81,800.05 or 52.88% of Total Gross Income.

OTHER FACTORS: Zillow shows this place as a 9 unit and has the value at $600,000. This is down $18,000.00 from last week. I do realize they are way off sometimes but they have the property info wrong.

The damn Tax Assessors want a had written note to give me the Assessed Value.

N.O.I. of 65,146.00. For a 10% return, I figure the high end value of this property is worth $651,460.00 and not $993,000.00

I am not finding good Comparable of this size. I have to use much smaller properties.

Comparables bring up
SOLD 7 Months ago: Distance from Subject Property: 0.67 miles. Multi Family 9 br / 4 ba / 4,448 sq. ft. $89/sq. ft.

SOLD 6 months ago Distance from Subject Property is 0.88 miles. 8 br / 4 ba / 4,874 sqft / $64/sq. ft. Multi-Family Home

SOLD 6 months ago. Distance from Subject Property: 1.05 miles
1/4 mile 8 br / 4 ba / 2,759 sq. ft. / $55/sq. ft. 5,000 sq. ft. lot Multi-Family Home

He needs the cash. I do not have it. Only ways to get it. Create note ans sell for cash?

Bring in partner? I have not even formed a business yet, so this idea is probably out! I have no Track Record