Hi Charles,
This is the reality, in order for anyone to get a loan against this property an underwriter will take the current rent rolls and figure a total monthly / yearly gross revenue, minus a vacancy factor!!
Then this underwriter will take and figure out expenses, he is not going to use your little 4 item list, he is going to use my 20 item list or someone else’s 25 or 30 item list.
They are going to figure out the worst case scenerio for the property to protect themselves, then they may offer financing for a certain amount and new buyer has to come in with $XXX,XXX in cash.
If I had to guess your seller bought this property for roughly $450k, with an original $360k FTD if he owes $330k and wants his $113k out, this is a total of $443k.
If I owned this property and was temporarily out of work, and I have a $550k appraisal, I could go to a commercial “Private Money” lender and get $55k to $82k in cash as a second.
Now, this property owner is probable getting a sizeable tax write off from this property, so he is going to laugh when you tell him you will give him $360k to $380k, this is not going to make this guy happy with you!!
He told you he wants the $330k he owes on his loan plus $113k he has in the property for down payment, closing costs and points.
Your seller is taking a loss offering this considering it will cost him roughly $6600 just to close and sell to you, which means he will have lost $15k roughly over 2.5 years and walked away from $107k in equity.
You keep throwing out scenerio’s? You have raised the rents higher than your original posting? Is there some importance to buying this property regardless of the outcome?
I reconstructed your income and expense based on $1400 per unit / month.
It is not a pretty picture, I would not touch it!!!
I also think your heating oil bill is considerable low in comparison to other 5 & 6 unit property Pro-Forma’s
Rental Income: $84,000 per year.
Vacancy Factor: $4,200 5% year.
Adjusted Gross: $79,800 year.
Expenses:
Insurance: $5343 Estimated for $700k
Electric: $300
Water & Sewer: $2,456
Heating Oil: $2,185
Property Tax: $9,600
Management: $6,300 @ 7.5%
Leasing Cost’s: $100
Basic Maintence: $1200
Major Maintence: $3,000
Snow Removal: $500
Lawn Maintence: $700
Pest Control: $500
Trash Removal: $600
Window Washing: $200
Janitorial: $250
Fire / Life / Safety: $200
Advertising: $200
Legal Fee’s: $300
City License: $150
Expenses: $34,084
NOI: $45,716
Property Value: $700,000
First Trust Deed: $46,227 $525,000 @8.0%
Cash Down Pmpt: $175,000
Cash on Cash Return: $00.00
Property Negative: $511
Estimated C on C: $14,000 $175k @ 8.0% per year.
Upside Down at: $14,511 $1,209 per month negative.
You might try opening your eye’s though, there are actually some properties I would consider a potentual deal, subject to due diligence!! Caveat Emptor!
6 Units / 2 Bdrm - 1 Bth. $399,900
164 Deleware Ave. Jersey City, NJ 07306
Price / Unit: $66,650
Cap Rate: 12.0
Gross Income: $82,220
NOI: $59,224
Diane Rivera - Broker Associate: 201-333-4443 x268
6 Units / 2 Bdrm - 1 Bth $329,900
240 Bergen Ave. Jersey City, NJ 07306
Price / Unit: $54,983
Cap Rate: 7.46
Gross Income: $41,616
NOI: $24,619
Claire Dimeola - River Street Realty: 201-615-9494
6 Units / 3 Bdrm - 1 Bth $499,000
270 Virginia Ave. Jersey City, NJ 07304
Price / Unit: $83,167
Cap Rate: 8.0
Gross Income: $60,000
NOI: $42,000
Pranay Gupta - : 212-361-9680
6 Units / 2 Bdrm - 1 Bth $360,000
177 Van Nostrand Ave. Jersey City, NJ 07305
Price / Unit: $60,000
Cap Rate: 7.75
Gross Income: $
NOI: $27,900
Michael Cervelli - Michael Cervelli Real Estate: 201-868-6300
6 Units / 2 Bdrm - 1 Bth $495,000
244 Princeton Ave. Jersey City, NJ 07305
Price / Unit: $82,500
Cap Rate: 8.9
Gross Income: $57,600
Noi: $44,123
Marybel Calayan - Coldwell Banker Commercial: 201-436-6225