Looking for some expertise how to structure a deal…
20 Unit Apt. Building + mini storage on same lot
Purchase price $500K
Needs about $60K in Rehab
Vacancy @ 40%
Post rehab value (includes lowering vacancy to market average = 10%) = $750K
I’m looking to finance the full $560K, cuz I don’t have the cash in hand. Is there a way to structure it where I get cash back at closing for the rehab?
I was thinking about asking for a conventional loan for $360K (Less than 50% LTV on post rehab value) then getting the seller to carry $200K and getting back the $60K at close to fund the rehab. Exit strategy would be to rehab, stabilize rents and expenses, increase occupancy, then either sell and cash the seller out, or refi? Would this work?
My FICO’s in the low 600’s.
Any help would be much appreciated. Thanks.
The deal your discussing is text book on what type of commercial properties an investor should BUY.
With Commercial property you want to look for poorly managed properties, and structure the deal just like you are doing. You want properties that are undervalued due to poor management. The 40% vacancy is rediculous. There isn’t going to be too many better deals then a 20 unit apartment at 40% vacancy, where the seller is willing to seller finance that much of the loan,and give you the $60,000 to rehab what is needed. This is a deal that could launch your real estate career.
Just make sure the property cash flows. If you sell it and make $100,000-200,000 with putting no money down, can you get a better deal then that, ANSWER: NO you can’t.
As a side note, there is not going to be any “easy” deals in real estate when you have no money. Every deal is complicated, so don’t worry about the complexity of this deal.