All Forum Posts by: Stanci March

@Chris Mason, I love that approach! 

Thanks! 

Thanks @Todd Dexheimer. Just to clarify, are you saying that a commercial lender will need at least 80% LTV in order to cash out the seller? I think that's probably about right but my primary question is whether or not they are going to look at my initial 10% leveraged down payment as equity (even though it is a loan that will still not be fully repaid at that point).

I hear you on cash flowing deals but how much do you generally expect to cash flow without putting any money into a deal, for properties in solid class B+ rental markets? Can't you get just about any property to cash flow if you put down a big enough down payment? 

To me if I break even on a monthly cash flow basis for a property like this, that I don't have to bring any cash to the table for, and I've got solid renters building equity for me on top of decent appreciation I'm in a pretty good position. I basically pay nothing in taxes and add $17k per year to my networth without using a single penny of my own money, assuming no increase in property values for 20 years (unlikely). At a marginal 2% PV increase I'd be looking at an average net worth increase of $32,450 annually (averaged over 20 years).       

I posted this on the commercial investing forum but haven't had much luck with responses. Maybe someone who works in commercial financing can help me out?   

I'm looking at a 100% leveraged deal on a 6-plex in a college town. This property should cash flow even (or very close to it) as a fully leveraged deal including expenses and should be an excellent appreciation play.

I'm putting 10% down through a cash out refi on another SFH I own outright, with some remainder coming from a second loan on my primary residence. Seller is carrying back the rest at 5.75% (seems a bit high but no origination fees) on a 1 yr arm (he has one year left on his arm with the bank)...at which point the rate would fluctuate based on prime just like his commercial loan. This loan will be on a 25 yr amortization schedule with a 5 year balloon.

I'm a bit nervous about the balloon because if the property doesn't appreciate in five years I'll only have ~7% (aside from my leveraged 10% downpayment) in equity and will need to come up with a significant sum to get my LTV sufficient to refinance with a commercial lender.

Am I looking at this correctly or will a bank consider the 10% leveraged down payment I have included in the deal as equity, putting me at 83% LTV? 

@Alexander Felice, I just wasn't sure if a bank would look at my downpayment differently if it was leveraged versus unleveraged. My 7% estimate for equity accrual over 5 years was running my evaluator with a flat market and the only equity being built through principal applied through my loan repayments but if what you say is correct (that my leveraged down payment would count as equity) then I would actually end up with 17% equity after 5 years in a flat market. In that case it sounds like I may not need to come up with any additional capital when the balloon come due as long as I could get a commercial loan with 83% LTV...or I may need to come up with as much as an additional 18% if I'm only able to find financing at 65% LTV.

Does that sound like the range of what I would be looking at (again, assuming a flat market)? Again, I'm not looking for help evaluating this deal. The market here has traditionally been very steady, and the specific location (two blocks from major university, downtown shops/restaurants/bars) within the market is superb. I'm expecting the property to appreciate enough to not have this be an issue but would like to develop a game plan for various scenarios. Thanks!   

@Christopher Phillips, please don't try to help me analyze this deal. I'm not looking for that so we'll both just end up frustrated. What I mean by $0 down is that I will have no cash in this deal. It would be a 100% leveraged deal. Of course I have CAPEX and maintenance including in my evaluation...I'm not an idiot.

My main question is; will a bank look at my 10% (leveraged) down payment as equity or not? 

I'm in Kansas which is also 20% like VA. I haven't done one of these yet but have met with a few folks that have been involved at various level. I'm actually meeting with an architect next week who specializes in these. I think I am still a few years out, gathering more traditional properties and building equity in them that I can cash out before tackling one of these projects.

Some of the historical projects that I've seen developed in my area are amazing and I'm fairly certain they were very lucrative. It just seems like they need to be done on a fairly large scale to justify all of the headache. 

I'm looking at a 100% leveraged deal on a 6-plex in a college town. This property should cash flow even (or very close to it)  with $0 down and should be an excellent appreciation play. 

I'm putting 10% down through a cash out refi on another SFH I own outright, with some remainder coming from a second loan on my primary residence. Seller is carrying back the rest at 5.75% (seems a bit high but no origination fees) on a 1 yr arm (he has one year left on his arm with the bank)...at which point the rate would fluctuate based on his bank loan. This loan will be on a 25 yr amortization schedule with a 5 year balloon.

I'm a bit nervous about the balloon because if the property doesn't appreciate I'll only have ~7% in equity and will need to come up with a significant sum to refinance with a bank. Am I looking at this correctly or will a bank consider the 10% downpayment I have included in the deal as equity? The down payment amount will not be secured the apartment building but by my personal home as well as my SFH rental.

No problem. If you find something that you need syndication for, let me know. Maybe we can go in on a project together. I've been looking at that market for a while. It's cool little town.