Huge deal 10 four plexes in one area

Financing, Hard Money Lenders, Private Money
1

Ok, I need help.

I need to know how to approach the bank with a deal I stumbled upon while searching through the MLS. I have an investor friend (Canadian) who has 150k he wanted me to find some condos and a 4 plex for him. While searching for 4 plexes, I found a string of what looks to be an apartment complex of about 200 Units that have been broken up over the years into groups of 4 plexes. There is a central pool and amenities as well as an HOA fee. Well there are 10 of the 4 plexes listed on MLS (50 total) all for around 90,000. A few are going to auction and most are short sales. They sold for around 325k during the peak so it looks like all the owners walked or are walking away. Most of the units are rented right now. Here are the numbers, what I need to know is how I approach the bank for the financing.

Avg Rent $600
Monthly (per 4 plex) $2400
Year $28,800
Total after 10% vacancy $25,920 (annual)

Expenses (Annual)
Insurance $1000
Maintenance $1500
HOA (common areas) $5184
Taxes $2157

Loan $4350

Now a full price offer on each would amount to $933,000. I have my friends 150,000, I have another rental worth about $140,000 free and clear that I plan on leveraging for $100,000. I have $27,000 in a silver EFT (liquid), I have another $9k in physical silver(liquid) and only a couple thousand in the bank, (just had to pay taxes and CPA, and like to park my cash in silver). I also have $14k from my brother who may be interested. Total of about $300,000 (mostly liquid cash) So I am looking at putting 30% down or $279,900. Loan would be $653,100 for 30 years at 7%. Is this realistic? Wells Fargo owns 4 of the loans so I was thinking of going straight to them and asking about a package for 4, maybe get them a little cheaper. I need some comments and help from the veterans if this looks feasible and if so how I can present to a bank. I want to look professional and have all my ducks in a row, before approaching. I have a Real Estate business established for 2 years to support asset protection and the like. Would the bank do a blanket loan, or turn it into a commercial loan. Any help is appreciated.

Canuck Living in US

2

Hi,

I started looking at your posting yesterday, there is a mix of things I don't completely understand!

So they are asking 93,300 per 4 plex unit, a total of 10 at asking price would be 933,000? Correct?

Now to manage any group of apartments the 50 / 50 rule applies!

$28,800 Gross Rents
$25,920 Adjusted Gross Rents with 10% Vacancy Factor
$12,960 50% FOR Expenses
$2,592 Property Management Fee 10%
$1,000 Insurance
$1,500 Maintenance
$5,184 HOA
$2,157 Taxes

$527 Sub Total of Expenses

$150 Legal
$150 Accounting
$80 Office Supplies
$100 Advertising & Marketing
$1,200 Replacement Reserve
$1,000 Appliance Reserve
$300 Owner Expenses
$2,980 - $527 Credit from Above

<$2,453>

$12,960 Potential Debt Service & Cash Flow
$4,350 @ $65,310 1st TD
$2,465 @ $27,990 Cash on Cash Return for Investment at 8%

$6,145

$6,815 Potential Positive per Year
$2,453 Adjusted Expenses from Above

$4,362 Positive per 4 plex or $363 per month

$43,620 Positive Per Year 4 plex Group or $3,630 per month!

How many sellers are there? You will need to get excepted contracts on all 10 buildings in order to end up with potential blanket financing under a commercial loan. I think it will be better to get individual contracts approved for the lowest possible price on all 10 four plexes and then seek independant financing from any commercial lender that does not have existing interests in the property as it will make the closing much easier as it prevents a conflict of interests!

              GR