7 - units with questions

General Real Estate Investing
1

Hello there

got a call last night just as the SF Giants was winning the pennant I mean bottom of the ninth and my phone rings around 9 pm anyways here goes

The call was from a guy who is calling me because he saw my bandit signs and is calling for his cousin who owns a property that is a7 unit multifamily complex and is in relatively good condition I asked about some of the details of the property and here’s what he has so far

7 units

$8200 month in rents all units full

100 K gross income
72 K net income

748 K first mortgage 25 year term fixed at 6.375

3 years taxes owed for a total of 48 K back taxes

seller tried too short sale this property but ran into problems with the bank

Seller would like 40 k to take over existing loan

I know I need to obtain more information on this property

This is the first call I have got about a commercial property I am comfortable with single family assessments however commercial deals are completely different in approach from what ive been reading so my ?? Are what additional information do I need to obtain and how should I go about evaluating this property

Thanks in advance

Marcel

2

This is a poor deal. Stay away. Catch it as an REO.
PRICE: $784,000 + $48,000 + $40,000 = $864,000

$98,400 GSI
-$44,200 Less EXP
$44,200 Equals NOI
-$58,693 Less DEBT SERVICE ($784K, 30yr, 6.375%)
-$14,493 Equals CASH FLOW

CAP: 5%
ROI: —

Unless there is serious upside potential in the rents, you’ll become as motivated as the current owner in no time to unload this upside down beast.

Just because you ‘can’ buy Sub2, doesn’t mean you should.

Just for giggles, let’s say you somehow saved $15,000 in overhead, did your own managing, and deferred the maintenance… you’ve still got nothing to show for any money invested. Walk.

3

Even though you would be buying subject to, you’d be paying $40k to walk into his cousin’s mess.

Plus, if you aren’t talking directly with the decision maker, you’re usually wasting your time.

4

If you take the property for what is owed which is $748,000 - then it can work.

If we use “javipa” NOI of $44,200 and you put 20% down, financed remaining for 30 years at 3.5%, you would have a NOI before taxes of $16,995. Not a great return but livable.