:banghead I have 24 unit apt, upside down ARM loan( surprise surprise)
Want to either sale or refinance. Any ideas? prefer to keep but>>> owe $397K, value 360ish, 1 loan,. And we don’t have money to put into the loan to refin. Bank wants 30% of 360k. Thanks
Hi,
Help me out here and explain to me "How does a property valued based on Net Operating Income and Cap Rate become upside down"?
Poor management!!!
Let’s see 24 unit’s and you owe $397k, which equates to less than $3078k per month @ 7% as a 20 year amortization!
So using the 50 / 50 rule we need to recieve at least $6200 per month to support the expenses and mortgage! So 24 minus 15% vacancy factor = 20.4 unit’s rented per year. So we need $6200 so we divide $6200 by 20.4 and we now know rents should be at least $304 per month per unit, not particularly hard to do!
Now if $3100 is the net operating income times 12 months this = $37,200 now if we take $400,000 and divide it into our NOI we get a 9.3 cap rate. Nothing wrong with that so why would you assume your property is only worth $360,000 ish. Although since you don’t indicate age or location 9.3 as a cap rate does not fit a class C or D property, 9.3 would actually be really good condition class B.
Well in my experience you are probable mis-managing the property, declining to handle basic upkeep and maintence and your probable looting the property as your personal cash cow as I don’t know any area of the country with rents as low as $304 per month.
The fact the property has an ARM Loan is unfortunate, but it really comes down to management as the TENANTS are paying all the cost’s of the property, it’s not like we go to work at our job and then pay all our Apartment complex debt on top of taking care of our family.
You will never sell this property for what you owe on it until the management is turned around and there is no way a lender will loan money on any mis-managed property!!!
GR