All Forum Posts by: Nick Rose

@Brian Gibbons  

I'm open to other financing options for sure, if they make sense.  So far, this seems to be too small of an opportunity for commercial lenders, and I would think private lenders' terms wouldn't be as attractive.  Could be wrong.

@Matt H.

I also think 10% down is great, and from my perspective 5.5% interest only seems low to offer.  That's just me though.  Maybe there are those out there that think it's a good rate.  

@Brandon Sturgill

Thank you for the input.   A stepped progressive mortgage is interesting, I'll have to consider structuring such a deal.  I'll likely offer a couple of options to the seller.  

As for rehab, I plan to pay cash.  The properties in the area are inspected and certified, so there is nothing too extreme.  I think the seller repaired what was necessary to pass inspection, but did not put money into making the property look appealing.  No pride of ownership.  

Scheduling a walk thru with a contractor this week.

I have a 3 building multi-property (1 commercial and 2 multi-homes) in Michigan that I am considering, for which the seller is willing to finance.  He has owned it since 1996, and is over 60 years old and still works full time.  According to him, he says he needs to sell for family medical reasons.

I haven't nailed down exact numbers, however I'd estimate a seller financed price of 140K, and he suggested 10% down.  He would do 'much less for all cash."  I'd rather not use so much cash on one deal, so seller financing is my goal.  Any suggestions on how to structure a seller financing deal?  Not sure what the common term lengths, interest, etc.   I think it's been on the market for quite some time.  Property definitely needs some cosmetic rehab-it's been a bit neglected.  I'm considering offering a higher down payment with a reduction in sell price.  For example, if I were to offer 8% interested+principal, 30 year amortization, 7 year balloon.

Reasonable or unreasonable terms?  Any input/suggestions are welcome.  

I'm assuming that since I'm looking at an 8 unit multi, the banks would look at the net operating income to determine the ARV. If so, I'd need to find the cap rate they use. But, if the cap rate is 9%, the multi unit I'm considering should be worth 277K in a perfect world.

Looks like your SFH example is ARV is based simply on comps.

I've run across a property that has two 4 unit buildings on one property. (8 total). One building needs renovation.  

Example:

If cash purchase price is 70K, renovation is 40K. I rent out all 8 units. NOI is say 25K.

If I buy all cash for the property and renovate - does anyone know a method to get my cash back out and secure a loan?  

I am getting details on a possible apartment building that is an 8 unit all brick historic building on the edge of a downtown area.  I am currently looking for a 12+ unit building in Michigan, but I was told about this building that is currently off market.   Word travels in a small town, and from what I'm told, the  owners are considering selling.  I don't know the numbers yet other than a previous asking price of 330K a couple years back.  My question is - what are the major road blocks for making an apartment building into a 'remote check-in' hotel of sorts?    I'm not interested in building a lobby, and having staff 24 hours.  The current 3 local hotels do this just fine for $320-700 per night.  I'd be interested in making this into something where users can contact me to check in online, and get a key code.  I suppose it would work much like a year round vacation rental, however I'd have to get the city to consider it a hotel/bed breakfast (minus the breakfast).   Not sure how this would work.  Recently, the city has banned all short term vacation rentals (<30 days) with the exception of a some that were grandfathered in.    Thoughts?

I may still be interested in buying it and continue to do year long leases.

The city is a small beach town that I grew up in, which is on Lake Michigan.  Excellent schools.  A new golf course and high end hotel were built recently.   1 block from quaint downtown area that overlooks the beach/river.  

Jason Hirko-

Thank you for the excellent points that need to be considered.  I do get a the feeling I'm stuck in the middle of the market.  I have enough startup capital to get a multi-family unit complex, however I don't have enough to get into the larger complexes and get some of the economies of scale benefits.   

Josh/Chris-

Thank you both for your input. I agree that 16% would be a decent return, however that return is assuming a lot of home runs. (NOI (expenses) is accurate, no out of ordinary major cap expenses, etc) To Chis's point, I would think most financials on loopnet are off a bit from reality. There will likely be more expenses and the return will end up being even lower. It wouldn't take much to realistically bring down ROI to 10-12%.

Correction: Current rent is 70K/year

I've begun poking around and looking at relatively small (8-15 unit, <700K) mult-unit apartment complex units.   Initially, the numbers don't look all that great.  Purely an example, I chose a property on loopnet.  This one has a high cap rate of nearly 10%.  Most have lower advertised cap rates.

http://www.loopnet.com/Listing/19631386/1260-McDiv...

I'll be optimistic and say that NOI they list is accurate at 50K.

Rent = 79,500 /year

NOI = 50K

Debt service payment/year (25% down, 5.5%, 20 amort.) = 26K

Capital expense fund/year = 6K

Cash flow then is 18K per year. I wouldn't be surprised if the advertized NOI does not include a management fee, but I'll assume it does.

16K per year after investing 85K loan down payment for the loan results in an 16.9% cash-cash return.  Not a horrible return, but this is also assuming there are no bumps in the road.  That 16.6% could easily turn into low teens.  Most units are even lower cap rates which makes number look even worse.  

Is my high level analysis way off?  I had a conversation with a commercial real estate broker that is a family friend and he was quite pessimistic on the topic of purchasing an apartment complex. His thought is iff I have property management I won't make any money on the deals unless I pay all cash.