Direction on 54 unit REO deal structure

[Yuhanna Sherriff]

Here is the skinny:

Just acquired 54 Unit Reo for $400,000.

In the process of inquiring on potential partners for renovation.. Approximately $180K to $200K

How should I structure this deal? As a limited partnership offering (equity) or mortgage (lender)

Here is the quick proforma if your curious. Estimated rents taken from HUD fair market value for the city and county.

Located on 2.9 acres, 37K sq. feet are rentable

25 1/1 - 532 sq feet @ $506
5 2/1/ - 615 sq feet @ $580
24 2/2/ - 888 sq feet @ $623

1st YR Proforma
Gross Revenue = $366,024
Vacancy Factor (15%) = $55,012
Operating Expenses (47% of Effective Gross Revenue) = $148,722
1st Yr Stabilized NOI prior to Reserves = $162,960

Estimated Value based on 10% CAP rate = $1,631,184

Primary exist strategy: Sell
Secondary exist strategy: Refinance to long term debt

As a side note, I have a loan commitment for $280K. i am putting 30% of the acquisition from my own pocket. interest rate is 7% for a 12 year term.

Thanks for your help

[Mike Jakobczak]

Well they both have their advantages.

But if you're confident in the area and that your numbers are on the money. I would try to get a loan partner. This will allow you to maximize your profits.

But if this is your first multi-unit building, I would recommend partnering with a expert in this type of venture. This will allow you to learn from the best and also take some of the financial pressure off your back. They may also get to your exit strategy faster and maximize your profits!

Best of luck and keep me posted!