I am seriously considering a 65 unit apartment complex for $1.5M. The numbers should work: $22k monthly income at %100 occupancy (has a waiting list), approx $3k monthly expense (includes taxes, insurance, utilities) I have only $100k for down pmt. Should I go to HML and finance all, then keep $100k for future REI.
I have experience in REI, successfully managed 11 units but sold 4 months ago due to divorce. My FICO is 734. Will be purchasing thru an LLC.
Any advice would be appreciated.
HML are usually short term, and rates very high, but if it still cash flows after the high rate, then it seems like it makes sense, as long as you have a plan on how to pay off the hard money loan.
Calder,
HML typically are looking for a sizable spread between the value and the loan amount. For this property to work with an HML the actual value would need to be somewhere between 2.1-2.4 million depending on the lender. Based on your credit score and the numbers you have provided you should be able to get this deal funded through a commercial lender. That will save a you a lot of money. Just the upfront points on a HML deal will cost you between 30-60K. Numbers like that can quickly eat into your cash flow.
Is the 1.5 mil the asking price or the value
Lenders loan 90 LTV
If 1.5 is the value you would need 150,000 down.
you might want to consider a management company to run it. Look at your last 11 units as far as problems and times it by 6. I hope this help.I do hard money. To get your duck in a row and if I was in your shoes get figures on commercial lenders and hard money and compare. Net operating income divide by selling asking price equal capitalization Rate. if net operating income is 22,000 divide by 1,500,000 is equal to cap rate of 1%. Cap rate of 10 or bettter buy. 5 or less = rent is too low, the expense to high , or property is out of line. 7 or less is negative cash flow. Look at the real book. gross rent multipler =sale price divide by the gross rent. The lower the better. If the multipler is 10 or above the price is too high.
IF HE IS WILL TO NEGOIATE TO COME DOWN , THEN PROCEED . lOOK TO SEE IF RENT CAN BE INCREASE. IF YOU TIME THIS RIGHT YOU SHOULD GET UP COMING MONTHLY RENT AT CLOSING.My motto is leverage. Use OPP- Other people money first.All Trump does is leverage of money.
his asking was 1.7, i offered 1.4, he countered with 1.6 - i think he would sell for 1.5. my guess the value would be 1.7 to 1.8 - if you know of any lenders interested, let me know.
thanks to everyone for the comments/suggestions