All Forum Posts by: Jimmy Solano

Sorry if this was vague. 

- 6.79% is the proforma cap rate based off the fact that when rents are stabilized and vacancies filled, (based off performance) the properties would be valued at 1.2 mil if sold at a 8% cap rate. Again, based off the P&L the properties are currently making 12,919 a month....thats with 7 vacancies. Once i get those filled i can get my NOI up.

- That 15% cap rate mentioned in the notes is what the Seller had in the listing. That number is based off the fact that the asking price was only 800k and they said the property was at 100% occupancy. That information is incorrect. I literally copied and pasted the listing notes when I first came across this property into my report but when I actually saw the properties this past weekend I got (and saw) the correct information. 

- Asking price is 800k. I have $16,000 to cover closing costs but that's an estimate so I may be off but my pre approval letter says its going to be 2% of the loan amount. ALSO I should've added another $15,000 to cover repair costs. Minimal amount of repairs/replacement of some appliances have to be made to some of the units. 

- The lender I am working with is doing 100% financing and the terms are 5.75% for 360 months.

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*This link comes directly from our calculators, based on information input by the member who posted.

Any input would be helpful.

Truly thank you everyone. I will put into consideration everything brought up. 

@Nathan Milholin 

- In regards to the other expenses my cash flow comes out to around 2k a month. 

- So the insurance is in fact a stab in the dark estimate. My logic is that this deal is actually 4 separate property package deal, 6 buildings total. 4 fourplexes, 1 triplex, and 1 duplex. I know....this might not add up but for one of the addresses there are other buildings "attached" to the same address.

SO yes, I estimated $800 a month for that.

- Yes, that number is correct, I am working with a lender that is offering 100% financing. One thing i did forget to put in there are closing costs.

- I haven't gone through my actual due diligence period yet BUT I will have an inspector go through and I will then get my actual estimates off that inspection. This is why i mentioned making the seller pay for repairs. Specifically big ticket items that he inspector may find.

To an answer your question with added expenses, (vacancy, repairs/maintenance, capital expenses) that would the bring my monthly cash flow to 2k a month.

Regarding repairs, the seller is not currently offering repairs. This would be an added contingency to my counter offer. The seller know he would have never got 915K. Seems like his number was always 875K. So my logic behind including repairs then is to give me what i want and you can get the price you actually want. FYI, I initially offered 750K but was willing to take on all repair. Although the properties are currently performing if I had to grab a number out the sky in terms of repairs/remodeling costs it was be around 40K-50K. I would still be will to take on expenses like landscaping and some remodeling/rehabbing items that I took note of during my initial walkthrough. 

Also forgot to mention, should i include that he make all repairs if I offer 875K or I walk away...

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*This link comes directly from our calculators, based on information input by the member who posted.

So have I have until tomorrow 5pm to accept this offer. Original asking price was 915k, I offered 820k, and he just offered 875k. Should I accept at this price considering these numbers?? Once purchased this will be a headache in terms of property management and repairs BUT it is currently producing. 

Any input helps. I originally wasn't going to move forward if he didn't accept anything more than 820k due to current state of properties/ completely disorganized paperwork, BUT at the end of the day i think this 875K number is still a good deal. I may be wrong. Again any input helps.

I was wondering if anyone else has dealt with this company before. I'm just playing it safe at this point to ensure I don't go in too deep with this company before it's too late. For me it's so far so good. I got a pre-approval letter but was wondering if anyone else has any experiences with them good or bad. 

The lender is Kendall Investors 14 LLC. Any info helps.

Thanks

Very good points @brentcoombs. The 4% cap rates was referring to what the seller's asking price is to its current performance. That's not even factoring the accurate insurance expense amount. For how its performing, insurance, and the number of vacancies currently, I think the asking price is pretty excessive.  The 8% cap is referring to my purchase cap rate if he accepts a 124k offer. You bring up an excellent point though with the flooding. Why would I even want to deal with that? Guess I should stay away from this. The flood insurance is probably high because they maybe they just had a claim and there rate went up. I was caught up on the low price I guess.

So the 21 unit property only has 5 people under a lease (so far that I know). Everyone else is month to month. I'm pretty sure this will be a problem with the lender. That's my big fear with this deal. The finance company I'm using for this deal does up to 100% financing but I'm sure they want everyone under a lease to lower the risk and prove its performance. I'm kind of positive on the area due to the fact that there plenty of businesses and major medical compound along with a hospital right around the corner for the properties. Also there's a medical school to a major university in the same vicinity. So there's plenty of students that need places to live and jobs in the area.