All Forum Posts by: Andrew Kniffin

king with attorney today regarding dispute around short-sale Purchase Agreement, then will watch utter Seahawks annihilation of Pats. :)

Good input from Joel Owens.  Give weight to his words. 

Chris,

I don't know how student leases would work.  Just make sure that the units aren't vacant for 3 months of the year, with you paying the mortgage note!  

I'd build in a higher amount of reserves to compensate for the wear-and-tear from students.  Additionally, I'd seek a higher Security Deposit.  

Your DSCR needs to be > 1.25x for conventional financing.

Just to confirm: an 8.4% cap rate does NOT equate to an 8.4% rate of return on your investment.  The two are different topics.  I'm sure @Bill Jacobsen knows this, but just wanted to "overcommunicate" that truth, since I've seen it confused before. 

A few thoughts:

• It's likely mostly students.  Are units rented only during the school year (9 months per year, rather than the full 12)?  
• How "hard" on the units are students likely to be? 
• Value is subjective to the market.  What cap rates are other 12 unit MFs selling for in the Kansas/Shawnee Mission area?  
• How would you finance it?  Conventional 25% down?  Creative fin'g (eg, Seller Note)?  What is your background / experience with multifamily?  
• What would DSCR be at that purchase price? How long has it been on the market? Where did you find the listing?

Interesting.  Congrats, @Chris McDaniel.  Sounds like a great deal for you.  Way to be creative and create a win-win for both parties. 

Why wouldn't they have gone with the $75,000 offer?  That's $5,000 more than you offered them.  

Did they prefer your offer because you allowed them to stay there an extra year, and they valued that more than the $5,000 difference?

@Mitch Coluzzi @Account Closed 

Update on the deal:

I learned that the property is not being foreclosed on March 1st, but rather the first "Confession of Judgment" will be defaulted on by that point.  The property is still a long ways from foreclosure.  

So instead put in an offer at $240K.  Seller countered at $245K and I've accepted the counter.  

Since it's a short sale, deal is now going to Special Assets Department ("SAD") of bank for their approval.  

Total rent roll is $4,900/mo, so at $245k purchase you would be at 2% of purchase price in monthly rents.  

This meets my numbers and am confident it will be a good purchase (assuming bank okays the sale).  

@Bob E.   @Account Closed I wonder if we're getting caught up in semantics here, but just to reply:

You are correct that my goal is to make money.  But I don't get the deal, and thus don't make any money, until the others see value in my offer.  Offering $350K is too much, but offering $1 won't be helpful either.  I can't craft a solution that meets everyone's needs unless I understand what they need.  I'm trying to find the best deal for me that also works for the needs of all parties.  They effectively have veto power, so if they don't like it no one will win!  

@Account Closed  I appreciate your input.  

The note was issued in June 2007 for 7 years fixed rate, with balloon/full payment due in June 2014.  It does not 'float' after that; it was due in full as of ~7 months ago.  Seller/Owner has not delivered any funds since the summer, though.  

Does that answer your question?  

To "make my offer work for my purposes" I must consider what the Seller, County, and Current Bank need, otherwise I won't get my Offer accepted!  So, the two seem intertwined to me.