8 door Sec 8 opp. for $640k asking - cash flow of $100,800

[Jason McGraw]

Looking for advice:

8 door MF unit in Boynton Beach, FL - asking $640k, 100% occupied with Sec 8 tenants - monthly income of $8400.  Haven't figured out why owner claims gross income of $91,740 yet but all of my analysis has been done on the $100,800 based on $8400*12.  Taxes at $6017 and owner states operating expenses at $13,470 and total expenses @ $19,487 with net operating income at $72,253.  Property needs approx. $20-30k in improvements based on a simple drive by viewing.  When I run my analysis with 5% vacancy, 5% capex, 5% repairs, 10% management and 6% property taxes I'm showing $2600 in monthly expenses before any kind of financing.  I have approx. 200k cash that can go into purchase and repairs but I'm running into a couple of hurdles.  First, I haven't found anyone willing to refinance the deal without 2 years rental and ownership and I hate to take hard money out longer than a year on the deal.  I'm open to any and all ideas on the creative funding to make a deal like this happen so perhaps somebody out there with more experience/creativity can chime in.  I have no intention of offering $640k but the cash-flow on this opportunity made me feel like I should at least see what everyone else had to say.

[Chris Connery]

Why do you think getting a commercial loan will be so difficult. I have several commercial loans, they are 5 year fixed at 5%, they adjust every five years to the 5 year treasury note rate(around 2%) + the bank adds 3%. They have no balloon payment and extend to 25 years. 

I’ve found that If you have a job, cash liquidity and a property that cash flows commercial banks are happy to take on a deal. 

I just did some rough numbers assuming you purchase it at 600k. if the gross rents are 90,000, expenses at 31,200 and debt at roughly 30,000(based off a 5% interest at the terms I've told you are out there) you have a net cash flow of about 30k per year. 25% down is 150k. That's a 20% COC return.

I’ve obviously left out the amount of repairs you think are needed. You may be able to get them to add that into the loan amount and disburse it to your contractors once the job is done.

This isn’t a deal I would try to get out of after 2 years. I’d hold this as long as possible.