All Forum Posts by: Charles H.

Thank you all for your contributions!

I am still analyzing sales of similar buildings around, and also waiting for actual numbers from the broker, so for sure i'll reanalyze the property. 

Unfortunately, it's been listed for like 10-20 days so my low ball offer will probably make him laugh, but i'll just buy if the numbers make sense for sure... He seems to own more buildings in the area so he has to know when the price is right.

Again, thank you all and BP.

 Hi Chris, thanks for the answer.

I haven't ask yet for the actual numbers. Just did a rough estimate. I have done the NOI estimate based on the fact they said 50% vacancy yes.

I looked at the sales on this building, and it used to be $285000 in 2015, and 175000 back in 2003. 

Not sure what was the state of the building/business in 2015 but based on the limited info right now, it's way not worth 450k$, which led to my question on how to approach people when they ask way too much...

Hello all,

so I found a 10 units building, that is apparently with 50% vacancy. Not much info except that it is listed with the potential GRI of $70500. it's listed for $450,000 (lol). Not renovated in a while. Roof seems not that old. Laundry hookup. 1bed/1bath. Florida. Not a big city but some job around.

Based on this info, I applied $70,500x0.5=$35250 of actual rent (if rent is being paid...!). Apply a .5 ratio for expense (rough analysis to get NOI)=NOI $17625.

Seems to be a C-ish place in florida. Would apply a 10% cap. so 176250$ which is 40% of the asking price.

My questions are :

- Am I doing a right analysis ?

- Due to the hot market in multifamily, everything is listed too high. How to approach and make an offer without looking like a douche (basically telling in a nice way "your building is not worth that much") ?

Thanks all for the help.

Charles

Thank you very much all for your contribution in this topic!

Thank you all for your answers and contribution to the discussion.

Best success to all!

Hi Torrey, do you have any interior pictures available? Any idea of the condition of the property (AC, roof, etc...)? Thanks! If you have anything valuable to send: [email protected]

Thanks Charles for your answer and clarification.

Is 20 year Amortization the best that can be offered in general (for new commercial investor) ?

Balloon payment tends to be offered at 5 years. Are 7 or 10 years balloons findable ?

Thanks again! 

Hello,

I am looking into commercial loans to get into multifamily buildings... I am sending out emails to local banks in areas I want to invest. These loans are a bit more tricky than conventional loans and one of the few emails I got made me jumped off my chair... So I'd like to have your opinion.

Type of Loan: Fully Amortizing Fifteen Year Commercial Real Estate Loan

Pricing: 3/3 ARM or 5/5 ARM priced at 350 basis points over the applicable U.S. Treasury Constant Maturity Index. Initial pricing today would be in the range of 5.5% for a 3/3 ARM and 5.75% for a 5/5 ARM.

350 basis point.... what does it mean? Also, do you all guys have to deal with an ARM commercial ? Not really a fan of ARM for conventional so for bigger deal like commercial, it makes me a bit stressed out.

Fee: 25 basis points of the loan amount

25 basis points, aka fee of 25% the full loan amount ?!?!? 

Loan to Value:Up to 75% of the lesser of the purchase price or appraised value of the property. Borrower to have 25% hard equity in the project.

Debt Service Coverage: 1.25x coverage of proposed debt.

Repayment: Principal and Interest payments in an amount to fully amortize the loan over 15 years.

Security:First mortgage and assignment of leases and rents on subject property

Guarantors:Unlimited personal guaranty of all having an ownership interest of 20% or more.

Does it mean I sign with my blood with such statement saying "unlimited personal guaranty" - therefore a really nasty recourse loan?

Maintenance Reserve:To be established for future upkeep of the property

Escrow Account:For property taxes and insurance


Again, these are typical underwriting standards and can be adjusted based on information reviewed during the underwriting process.

Also, no balloon payment? or is it the ARM 3/3 or 5/5 that says balloon in 3 or 5 ?

Any other thing you see in here that makes you wonder...let me know. As of now, I am just checking out banks in Indianapolis area.

Thanks BP community for the help and understanding of these loans.

I ask myself this same question all the time. Yes it will, because it’s a cycle. But the number one thing to focus to either buy it right (have a good deal) or buy something that is cash-flowing. 

No need to worry if you do one of these. Even better if you do both.

Thank you, @Michael Plaks, for your insight. It's unfortunate that start-up costs are not deductible.