All Forum Posts by: Bruce Harding

Originally posted by @Damon Pendleton:

Bruce, have you and the broker looked at agency financing programs that might extend that to 30 years with that 25% down? 

No.  I will bring this up.  Can I go 40 years ?

Forgot to mention this would be an FHA.

What seems "off" ?

Looking at a mutlifamily with over 20 units.   Last roofed and sided in 1996.

Owner asking for a certain price but I found out the roof will probably last another 5 years at best.

Class C property would generate $50K year NO.

Would be taking a non recourse 5 or 6 year interest only mortgage loan on property.

If owner does not provide concession looks to me like I would have to walk on the deal ?

I am new to the loan process.

I am looking at this scenario:

$1.75 MM building

$475K Cash Down

finance $1,225,000

I have loan options. Building yielding $116K per year prior to PITI.

NIO about $65K currently.

Regular mortgage of 6% for 20 Years would be approx. $108,000 Per Year so no way to afford that up front.

Working with broker on Interest Only Loan for 5 Years - Payments about $61,500 per year.

Current owner paying about $50,000 K payments.

Property would baloon in 5 years.

Is this a viable option and then refinance after the 5 years ?

With a regular mortgage $116 - 108K would not give me enough to run the building obviously.

Oh yes. Lots.

Not getting a good feel for the numbers. They are asking 1.7MM

NOI is $116,000 but their mortgage payment is only $27K per year. They are friends of mine and have not put the property up for sale with anybody yet.

I would have to put down $475K and finance 1.25 MM

My mortgage payments I figure would be over $100K a year barely leaving anything left figuring a 6% 20 year. Water could be individually metered to add another $6K a year. Rents could be raised $50 yielding another $14K a year. But then might lose tenants as it is almost always at 100% occupancy. Rents were raised last year by $25. Property was last roofed and sided 1996. I am also being conservative with the mortgage numbers. Me being new they might want 30% cash up front. It would take my entire IRA and a home equity loan to come up with the cash up front. I would only have $50K reserves. And then potentially a new roof. Not getting good vibes from this deal as I am a numbers guy and understand numbers and potential risk. Putting in $475K taking the current $116K and adding potentially $20K (and the meters would cost an additional $24K up front) would be a 7.5% return on cash. And then there is that roof. Could be a $150K within at least 5 years.

Also reserves would be down to about $26K.

Being new I don't think I have the experience to make this deal work. I smell risk.

Owner has stated they are set on price. She is going to offer to other people who are in the business.

I don't think anybody is going to pay $1.7MM but I could be wrong.

BTW only a 4 cap

Yeah I looked.  Property is an hour away.   There is a manager living there that has reduced rent.  Handles everything.  It is a turnkey at current mortgage level.

I cannot see anything other than rent increase and water meters.   It is in a small college town.  They are already getting income from garages and laundry etc..

Not getting a good feel for the numbers. They are asking 1.7MM

NOI is $116,000 but their mortgage payment is only $27K per year. They are friends of mine and have not put the property up for sale with anybody yet.

I would have to put down $475K and finance 1.25 MM

My mortgage payments I figure would be over $100K a year barely leaving anything left figuring a 6% 20 year. Water could be individually metered to add another $6K a year. Rents could be raised $50 yielding another $14K a year. But then might lose tenants as it is almost always at 100% occupancy.  Rents were raised last year by $25. Property was last roofed and sided 1996. I am also being conservative with the mortgage numbers. Me being new they might want 30% cash up front. It would take my entire IRA and a home equity loan to come up with the cash up front. I would only have $50K reserves. And then potentially a new roof. Not getting good vibes from this deal as I am a numbers guy and understand numbers and potential risk. Putting in $475K taking the current $116K and adding potentially $20K (and the meters would cost an additional $24K up front) would be a 7.5% return on cash. And then there is that roof. Could be a $150K within at least 5 years.

Also reserves would be down to about $26K.

Being new I don't think I have the experience to make this deal work.  I smell risk.

Owner has stated they are set on price.   She is going to offer to other people who are in the business.

I don't think anybody is going to pay $1.7MM but I could be wrong.

Hmm.... so I received a message on the property:

The 65K you are using includes my debt service cost.

My debt service is ~26K.
Taxes and insurance are another line item.

So, the operating income on this property is

116K before PITI.

Question:   On this property if sold at $1,700,000 with 25% down of $475K - lets say roughly $72,000 mortgage a year.

Am I correct that in the above the owner is paying only $26K a year in mortgage payments ?