HML

Financing, Hard Money Lenders, Private Money
1

I located a 20-unit apartment complex for sale out-of-state for $80,000 that appears to have a lot of potential. Currently, it’s totally vacant and due to sitting empty has had vandalism. It is sound structurally and the roof is in good condition. The broker says the owner dropped the price over $100,000. I am in the (very) early stages of due diligence, but it appears that once fully operated, this place could bring in good cash flow. The broker also said each unit could fetch around $450-$500 in rent, earning the owner ~$110,000/yr in gross income if 100% occupied. He said there is another complex located across the stree that is near capacity, so this one should do about the same when fully repaired. Even at 50% occupancy, it would still bring in ~$50k/yr in gross income. One unit is for a manager, which the broker said the manager of the complex across the street already expressed he would like to manage this complex, too (hmmm).

Besides being out-of-state, here is my dilemma …

  1. I need to do more due diligence on the ARV for the complex. It’s located ina rural location without much in the way of businesses (locally), however, the broker seems to believe the area is better for rentals (house and apartments) than home ownership.

  2. There will be an initial holding period. How long, I’m not sure. I thought about hiring a GC to repair/complete 5-10 units at a time, rent those out, etc., until the whole place is completed. Not sure of the time involved (yet).

  3. The broker estimates repairs at $10-15k per unit. This would bring the overall cost up considerably. The $80k sticker price is noce, but adding another $250-350k doesn’t make it as attractive. And I certainly don’t have those types of funds hanging around.

What I’d like to do is this …

First, find out how much the property is worth when completely renovated, and how much it will cost to fully renovate. Then I would try to get a loan for the purchase price. I would also need some sort of construction/repair loan for the work, too. I’m not sure of my options right now, but I’m guessing I may have to go the HML route, which may work out great. I could get a 60-70% ARV loan, buy it, make staged repairs, rent it, etc.

Anyone have any words of advice (other than to skip the deal or flip it to someone else)?

Thanks!

2

you might be able to find a 65%arv loan depending on what state you’re in?
or another way this could be structured is 15% down or so on the purchase price of 80k, and then the lender will cover 100% of the construction portion including interest reserves. Would have to know the completed value figure to judge which would be less out of pocket for you.