8.6 Cap, B class, 18 units, $823k

[Sam Epperson]

Forgive me if this isn't the usual format, I haven't even looked at other posts. Am I close on these numbers?

link here: http://www.loopnet.com/Listing/6768-S-East-St-Indi...

List: 823,000

Cap: 8.6%

Units: 18

NOI: 70,778

(estimated) Expenses: $71,000

No T-12 or rent roll or other specifics given, so I'm having to go with my knowledge of the neighborhood and self-taught practice from listening to podcasts and such.

Wanting to buy this with no money down. All money from investors.

Down: (25%) $205,750 @13% (to investors)

LTV: (75%) $617,250 @ 6%

Reno: $2,000/unit * 18units = $36,000 (also borrowed)

Total Borrowed from investors: $241,750 @ 13%

Total DebtServ: [$31,427] + [$37,035] = $68,462/year

((just guessing about renovation costs. For the most part, they look great. Money would go to a lot of cosmetic enhancements))

Current average rent per unit: $655 (NOI*2/12months/18units)

Raise rents 10% to $720/unit average

New Gross Income: $155,520

Expenses (previous plus $3,000 ?): $74,000

New NOI: $81,520

DebtServ: $68,462

Cashflow: $13,058/year  == $1,088/month

Let's say I'm exactly right on renovation costs and expenses. What else am I missing? Is a 13% return to investors good enough? Is it safe to assume I could borrow the loan amount from bank/lender at 6%? What mistakes have I made?

[Cara Lonsdale]

Just an FYI, to syndicate a deal, I would stick to a $1.3MM price point and higher so that you can obtain a non-recourse loan.  I don't know of a lender out there that will do a non-recourse loan under $1 Million (loan amount, not purchase price).  So, to get to that, it will be roughly $1.3MM purchase price.

Your investors won't want to touch a deal that has recourse to come back on them.  This is why non-recourse loans are good for syndication deals as they are exclusively linked to the project, and not the people.

Also, you will want to use a 50% rule when figuring expenses (50% of income).  This is a nice conservative figure that looks good when presenting to a lender.

Lastly, make sure that you have at least a 1.25% Debt service ratio.  This is a good rule of thumb for maximizing opportunities for loan.

Just a few thoughts to consider right off the top in glancing at your deal.

Hope that helps!