All Forum Posts by: Connor McGinnis

I have an apartment complex under contract in the greater New Orleans area. It is the best deal that I have found in 6 months of searching. 12 units total. 9.2% cap rate.

I just need help with financing this deal. I am 100% financing. I am taking a down payment loan out from my parents at 5% interest, 10 years amortization. They will not do a longer term.

I need help finding a bank or national commercial lender that could help provide me a commercial loan with a 25-30 year amortization. The local offer from several banks in the area is 7.5% interest rate at 20 year amortization. This number projects a -$15k annual cash flow due to having to pay back the down payment loan at the same time, which is hard to incur.

Any advice or any recommendations on who I can work with to provide a 25-30 year amortization loan to help with cash flow?

I am looking to buy an apartment complex in the greater New Orleans area. I am from the Midwest where cap rates are high and you can have positive cash flow with 10-15 year loans. In New Orleans area, cap rates can be between 6-8%. To make these deals work, it seems like you have to take out a longer term loan like 25-30 years.

You have to pay such a significant more in interest over time with these long term loans. Is this what you have to deal with when investing in this type of market?

I am also 100% financing which makes this even worse. I have a family investor that I will borrow from for the down payment, then finance the rest from the bank.

Since I have to do 25 year minimum terms to make a deal work here, is that worth it and is that the norm for these types of markets? My realtor tells me this is normal but it seems very risky to do. It seems like investors strongly bet on appreciation here which I dislike.

Any insights here would be very helpful. I am currently negotiating on a 12 unit deal and am struggling to make the numbers make sense.

@Ian Stuart great insight. Thank you very much.

@Evan Polaski excellent explanation. Super helpful. Thanks Evan!

@Greg Scott so you try to get a 30 year amortization on your commercial loans and then pay it back faster only if it makes sense?

I am looking to invest in the Metairie, LA market. It is a suburb just outside of New Orleans.

Can someone provide some insight on how you structure your commercials loans? My parents who invest, say they never do deals with more than 15 year amortization. They are in a different market (northern Illinois).

I have been struggling to find properties in this market that provide much cash flow at a 15 year amortization with 7-8% interest rates.

I had one deal fall through for 36 units. It was an 8.11% cap rate with current rents with upside to raise rents by 20% with renovations done to the property.

Some other investors recommend doing a 20-25 year amortization period on the loan which helps cash flow a ton. However, it takes a long time to pay off this property and forces me to accumulate much more interest over time.

Looking for some advice on how to structure commercial loans when analyzing apartments. My parents have the cash to help me with a down payment which I would then pay them 5-6% interest on.

Any advice would be appreciated.

@Connor McGinnis I will also add that most units will most likely have to undergo renovations to get to the pro forma. Units are in OK shape with some recently renovated. I am unsure of how much I could raise rents with current state of the units until I would have to renovate.

Hello,

I am looking to close on a 36 unit deal. Finalizing terms now and will begin inspection period soon.

This will be my second deal of my career. I have an investor that will loan the down payment and so I am going in on this deal with no money down.

After negotiating price down, with current rents, I will break even on cash flow after year one.

The current rents bring in $33k a month. The pro forma has this bringing in $44k a month. By all my research and estimates, the pro forma is pretty accurate. Therefore, I will need to raise rents significantly to get closer to the pro forma market rent rate.

What strategies would you deploy to raise rents to get to the pro forma quickly without raising a ton of vacancies right away? Would you raise them slowly over the course of 3-4 years until we get to the pro forma or make bigger rent raises now with the risk of losing many tenants?

Looking forward to hearing how you all would handle this one so that I can see strong cash flow asap. Thanks.

Hello,

I am in the closing process on my first rental property duplex. The need help with some repairs including electrical, hvac, plumbing, and other cosmetic repairs like paint, dry wall, and laminate floor board replacements. There are other carpentry repairs too.

I have received 3 quotes from general contractors at two of them came in at around $17k without trade repairs included (electrical, plumbing, and HVAC). Only one contractor included trade repairs which brought the final total to $22k. I’d imagine they outsource this work I suppose they could do it in house as they are a larger company.

To get the best value on the work, is it better to contact tradesman directly for those repairs and then have the general contractor do the rest? I am looking to potentially do the painting myself to save money. My timeline is to close on April 5th and get the other unit on the market for rent by the end of the month. Hopefully landing a tenant in May.

I would appreciate anyone’s insight on managing contractors quote and how to manage repairs in a cost effective way.

Thank you for any insight in advance as I close on April 5th!

@Melanie P. Yeah that makes sense. My thought was that if serious damage was uncovered in the inspection period then I could back out.

However, it won’t kill the deal if major damages were uncovered from electrical issues.

I will certainly switch everything in my name asap and take care of all permits/inspections from the electrical needed.

I appreciate your insight. Thank you!