46 Unit Apt. - Need help structuring.

I accidentally posted this in the wrong section originally.

I think I have all the pieces and don’t know how to put them together due to complete newness in investing in apartments. There is still more due diligence to be done but here are the preliminary figures.

46 Unit Apartment
Gross Income Potential: $314,500
Effective Gross Income (w/7% vacancy): $292,500
Expenses: $120,000
NOI: $172,500

Cap Rate: 8%

Seller is older investor looking to start selling off properties and retire. He doesn’t have them on the market at all but would sell the property if he could get his price. He agreed to sell the property for 1.7M

I have five individuals who I have planted the seed with about this property and all of them are willing and able to purchase a property of this size if the deal is right. They will all qualify for financing and some could pay cash if they really wanted to.

Using those figures I valued the property to be around $2,150,000.00 (which could be off, like I said “I am new to this”)

How can I position myself on this deal?

I was thinking about getting an option to purchase the property from the seller and somehow using that to make some money on the deal. If I do it this way, I don’t know how I can show the property to my investors without them talking with the current owner and price coming up. I don’t have a brokers license but know one, would I be breaking the law in Tennessee?

I am hoping to offer the end buyer a final price of 1,950,000 (10% discount of value) and make the difference.

Any advise on how to work this would be appreciated.

it’s pretty standard to have the “and, or assigns” clause in commercial RE purchase contracts. If you get the property under contract, you’ll probably have 3 days to come up with earnest money. You can flip in that time, or come up with the earnest deposit and assign your right to purchase to another investor for your price. As for price, coming up, if you are offering a great deal to the investor, there is no reason they should begrudge you making some money off the property. From the sellers perspective, they would have to pay a broker if they listed anyways, so there shouldn’t be a problem from that end either. Every one of the people involved in this transaction got their start somewhere. If you are honest, and make a win/win deal, you probably won’t have any problems. Just my thoughts… Happy hunting!!!

like Michael S. Hearne said do it just like taht.
i will explain it strait and simple.
YOu come up with the ernest money you aquire the rights to, withe intention of instantly selling the rights to.
get a purchase contract, warranty deed ,authorization to release info, and limited power of attorney.
warranty deed is the most important.
go to your local title company and have them do this for you.
they can get you set up then your next one will be easy cuz you got the cash.
to get ernst $$ just ask some other investor for the cash with a % return on his loan to you.within how ever many days weeks,etc.

Thank you very much. That really helped out.

What would be a reasonable “average” earnest deposit on this size transaction. Keep in mind that he isn’t in a hurry to sell, but would if I could get his price.

Also, is there any other costs I should consider when deciding whether to flip or assign? Such as a transfer cost if I flipped itor some other unexpected tax, etc…

If I flip it, would I actually need to deal with a lendor at all or just make sure my title company and closing attorney were ok with an immediate flip for a substancially higher price?

Mike Hearn…that you, I can’t agree more about people getting there start somewhere and wanting to lend a helping hand.

5to1. Thank you too…I wasn’t sure where to go once I had all the financials and interested buyers.

“standard” earnest deposit is 1% of the purchase price, but I have put down significantly less; just like everything else in RE, it’s negotiable!!! As for unexpected costs like a transfer fee, the person you are assigning to pays the assignment fee. Your only concern is your capital gains tax; talk to your tax advisors on ways you may be able to reduce your taxable income; that’s as far as I’ll go there!!! As for dealing with lenders, you’re not under any obligation, just remember, that unless someone is paying with there own cash, or private money, the property will have to be financeable at your total sales price, which will include your assignment fee. Otherwise, the deal will never close and you’ll never get paid. You can scope out potential lenders and get a pre-aproval based on the property. Back to unexpected costs… Say your strategy is to purchase at 60% ARV minus the cost of repairs and sell at 70% ARV minus the cost of repairs. You’ll need realistic estimates of what repairs will cost, which means an inspection and contractor bids - unless you have the in house knowledge to do this. This increases your out-of-pocket expenses, but makes it a lot easier to get other investors to buy when they know what they are getting into. It also means you aren’t taking any chances on your profits. With the authorization to release info, you’ll be able to get payoff quotes for existing financing, eliminating any surprises there. As for needing an attorney’s aproval or a title company’s aproval; the attorney is an advisor only and the title company sees it all the time. My brain is half off right now, so I’ll quit while I’m ahead. There are a TON of tips for this type of stuff. Best bet is to keep asking questions here and find someone local doing what you want to do and let them mentor you!!! Hope this helps…