All Forum Posts by: Rao Mu

The 1.8 million is the total equity required and 5.2 million is the debt financing. Yes, 600k out of 1.8 million is 33% only, but he is buying me out at 6% cap rate which is higher than 4.5% to 5% prevailing in that area. Most importanly, this project has all approvals and everything to start the moment we close the land.

I got in touch with a developer who is looking for someone to put equity into his project. Here is his proforma, 

- No. of units are 44 (75% 1 bed, 25% 2 bed)

- site acquisition costs are 1800000

- Construction costs are 5.2 million

- Total cost per unit around 159000

- NOI after taxes/insurance and other things - 600K

Here's his proposal-

1) He is looking for 600K for 40% ownership

2) After built and stabilized, he wants to have the option to buy back my share at 6% cap rate.

I compared the comps with the next door he built (122 units) and the rental comps match fairly well. He told me he is not able to get the loan for construction because they want the whole acquistion costs paid in cash. 

Here's what I am thinking will happen 2 years from now (after stabilizing):

1) If he buys me out, my share would be = (600K/0.06 - 1800000 - 5.2 mill) * 0.4= 1200000

2) If he doesn't buy me out, we refinance the project for 5% cap rate or so and I will get the cashflow and also, I can get the equity back.

Any thoughts?

I am trying to find ways to reduce the down payment for a 5 unit property in Pennsylvania. It is listed at 800k and I am trying to find a lender who can give lend me at high ltv for owner occupied scenario. Fha is ruled out because it is 5 unit and they don't finance 5 units with 3.5%. Will any conventional do with 10%?

I'm interested to talk further.

That's right. Downtown prices will go down from the already sky high they are at. Greenville prices will go up from the already low prices they are at. Why should greenville house that cost 500K pay the same taxes as 2 million dollar house in downtown? Governor is doing the right thing by asking Fulop to do reval. 

last time they tried to do, no one liked it and city wasted lot of money. I really wish they they do it this time because because right now city charges same tax on Greenville and downtown where prices are astronomical. There is no law that says take money from poor and feed to rich. Say for example, downtown house listed for 2.5 million is paying 12k taxes, where as a similar house built in Greenville like 10 years ago pays same tax. What justice is this!!! 

hi Sean,

I am wondering what happened to this project. Is this a viable project? Is there rental market in that part of the town? How is the neighborhood? He is still trying to find investors, but I don't know why it was not sold for 6 years...

www.empiresilkmill.com

http://citizensvoice.com/news/developers-spin-silk-mill-into-new-living-complex-1.1367502

My plan was to get the land and get the approvals done. That adds value to the land so it becomes shovel-ready project for the developer and he should be ready to pay premium price. I might leave without building and cash out with say 20% premium on the cost of land and approvals. 

I am in the same boat as Gloria, except that I already identified the site and it is zoned for 50 apartments in 3.5 acre site. We are in the initial phase of involving surveyors and other professionals. It is in central connecticut. What is the expected cost for the soft costs? The plan is to involve a developer after approvals and get it built - I am not a developer, by the way

I am talking to a land owner about putting a letter of intent on a land in an urban locale and get it approved for an apartment complex of around 50-60 units, with 30% affordable component to it. Obviously, I will buy based on the approval contingency. This is the only way I can get the approval done. I am reasonably confident that it's going to be approved. It's going to take me few months to get approval. However, since I am not a developer, I have few options to add value into the property after approval. 

Option 1 - Buy the land and spend time and money to get approval and add 20% markup and sell to a developer.

Option 2 - Buy the land and spend time and money to get approval and stay in joint venture with the developer and go to the bank and get construction financing and get the building up and ready. This is lucrative for the developer because he can get in the deal without much equity. 

Option 3 - Buy the land and spend time and money to get approval and stay in joint venture with the developer and get some cash out from the developer, however stay in the deal till the project completion. This reduces the risk a little bit, since I can recover some of my money. 

What fellow BP guys think feasible? What are the pros and cons of it?