Wow, how the heck do I handle this deal

I sent out some emails to people on craigslist that were advertising rentals asking about purchasing them and got back a doosie of a response on one. Guy had a condo for rent and emailed me back that he wanted to sell all of the condos, he owns all 12 in the complex. He is willing to sell all 12 for $940k, they are mixed 1, 2, 3 br. He’s already in his initial email stipulated that hes not going to deal with any games so stuff like trying to get him to sign a contract with a over 30 day period and assignability is not going to happen. How in the world can I make this happen? If I bought to hold and rent I would need a big down which I don’t have. Maybe hard money because they are definitely far enough below hard money % limits. I just don’t know how I can carry the loan until they sell. Right now he’s getting around $1150 each per month, maybe with most rented I can swing it temporarily and hope to all that is holy one sells quick but that’s definitely risky. I know its a major deal for a first deal but the numbers are solid, at an average of $78300 a unit there’s a lot of room to make money even with hard money and a reasonably long hold time on some of them, etc. I haven’t seen the complex yet but I know what condos cost in this state. Should I just pass this along for fat referral fee or swing for the fences?

Ps- I can privately show anyone I trust the full email if you want to see it but I am not going to post it publically, this deal is too good to have any vultures go after it. Let me know if you want to see it.

Swing for the fences if the numbers click!

Down payment requirements are not so rigid when your going for 12 units. Get allllll the verified numbers along witht he ones the current owner “forgot”, put the crap together in a neatly organized folder with graphs and income statements and an executive summary, and arrange a meeting with the senior loan officer/ president/ manager at the nearest bank. Since you don’t have any experience, substitute the lack of it by stating in your presentation folder the people you will be using and what they bring to the table.

Go to page 195 in “Flip” to get an idea of some of the crap to put together.

I also don’t have any reserves…

I think I need a cash partner…

Ok, so I am brainstorming my a** off. I wonder if I could find a partner that would pony up some cash to be paid off as I sell off units? Maybe take a $100k loan and pay him back like $150k, maybe $25k out of each unit sold for the first 6. The $100k could be used to cover the monthly payments on what I’ve borrowed until I get one sold and be used as a reserve to some extent. Obviously the rented units will also bring an income to pay the note as well. As they sell every dime over the $25k I use to pay the partner back would go towards expenses, paying the note and a reserve. I wouldn’t want to touch anything that comes in for my own personal use, it would either be used to cash out the note, pay back the investor or go towards expenses…once all that is done I would take every dime and put it towards another aquistion. The profit left over would probably be put to use as a down payment and reserve on a large apartment complex. As for the condo complex I would be trying to sell off all of them, worst case scenario is renting whatever doesn’t sell right off.

This guy already sounds a little too demanding to get any great deal from.

With commercial loans, it’s assumed the borrower or guarantor will be looking to the property’s income to pay for itself and a profit. You become less responsible for personally shouldering the debt. After all, if you had the money to personally shoulder commercial properties, you should be on your yacht instead.

If you plan on flipping these properties, the heavens open up to you and financing is simple. Bridge loans would be the easiest thing to do in this case. You wouldn’t need to make the contract assignable but you’d probably want to include a clause that says something like the one I told you about for auctioning to limit interest and carrying costs.

Partners work to of course. I’d go for the top RE broker in the area who has plenty of money and can sell the properties fast.

The terms:
12 deeds for $940,000, cash deal no mortgage contingiencies, no counter offers. I’m quite set as the owner and will not accept anything less. I know what the value of this building is and can be in the future tense as well.
We will not accept nor counter offer nor ANY concessions, it is AS IS, and can close within 30 days of signing a fully executed P&S contract. Be sure you and your partners are present for the signing. We have been down this road before… so will not accept anything less.
We can show you via a the internet the latest units that were up for rent and filled.
To walk through the building, a ten percent down payment held in escrow by our attorney will be required. My attorney has all documents set to close.
If I hear of any person/persons approaching any of the current tenants or molesting them to see the inside of the building otherwise, the deal will be placed on permanent hiatus and noted as a breech in contract. I’m firm on this component, and have worked extremely hard at building up this client base, the last thing that I want or could need is a scared client/tenant freaking out and considering not renewing their leases due to this.

This guy is a savvy seller which makes him a very annoying person to work with. I’d figure out why he’s selling first, hopefully it’s something that would make him “motivated”. Twist his arm once you know what he wants to ease up on some of the terms. Thus far this is not a no- money-down deal without a partner. Don’t ever pay for what a property “could” be worth or in it’s “future tense”? either. Please remind him it’s “asphalt” and not “asfalt”… LOL

I don’t care what the property will be in the future, that’s for sure. Just like a cheap prostitute this will be a get in and get out deal. Well I might keep one unit for myself but other than that the others are GONE asap. I want to pay back everything as quickly as possible and move the money onto another project. Holding all units long term isn’t workable, the numbers suck as a rental. Granted with the upgrades done on things like plumbing, electrical, etc mean having to upgrade these items is not an issue and won’t be for a long time but even still its not going to be a huge money maker unless I get rid of them fast. He definitely does seem savvy and from the pics I saw this isn’t some slumlord that has deadbeat tenants, these are nice units. Units were all hardwood and since the buildings were built in 1895 there are some cool features like some of the walls are brick. Put it this way, its nice enough for me to live there its definitely not too shabby. :wink:

Wheels are turning guys…I haven’t stopped thinking about this one all weekend. I will figure it out or figure out why I shouldn’t do it.

What’s left to figure out? I thought you’d be done the deal and on your way to Costa Rica by now.

These properties are being rented but only because 1 person owns all 12 condos and also owns the condo association, correct?
So the conversion has already happened. What does it take for you to make the 12 families homeless to sell these things off to buyers?

Next obstacle is either a bridge loan or a partner. I’m sure a preapproval letter from a lender will work just fine in place of 10% down if you use your persuasion skills (you can borrow my Sig if needed). You can bump up the price 10k or something to make the seller more inclined to work with you also. You’ll only need 1 contingency in the contract to escape for any reason so that’s not a problem.

Have you talked to any of the top brokers in the area to see if they’d like to partner up with you? Sometimes bridge/ HM lenders will do joint ventures instead of just lending the money. Food for thought…

Well one thing is for sure I need accurate comps to make sure this deal is as good as it looks in theory. My mother used to be a real estate agent and her best friend (and former boss) is a pretty big broker in the area. I’m going to pass her the info on each unit size (1, 2, 3 bdr) and get comps from her. Should give me a clearer picture on how much equity we’re talking about here.

I’ll look into bridge loans. Also, private money…see what’s out there once I know how much equity there is. If the numbers are right I think I can make this happen, this will definitely jumpstart my investment career like a 100,000 volt shock.

Btw, know any bridge lenders off the top of your head that will handle a project that’s just shy of $1mil, that work in CT, and will lend on this type of project?

Well detailed info about the project and the sizes, etc of individual units has been sent off to a broker. I’ve asked her to get me comps and an estimation of the average days on market for the area. Based on what little poking I did on the MLS last night I’m going to go out on a limb and guess that the numbers will work well on this one and I should be happy with what she’s going to come back with. I really hope this one works out for me. Also, it will be nice for the broker to get a nice commission check as well, my mom owes her a lot for all the help she’s given her over the years.

If anyone has any ideas on a company that might do a bridge loan with suspended payments for 6-24 months for approximately $1 million please let me know. LTV will be sub 80%, I know there are companies out there that go above 80% for bridge financing but obviously more than that makes it a bad deal for me. Looking to be under 75%.

Are you taking about note brokering?


Rich-- any update? was just curious how this deal is or is not progressing?

Didn’t work out, numbers weren’t high enough on the resale value to make it work. Plus a few other annoyances.

at 20% higher than what you want to sell them for. By the time the lease is up, maybe your market will be at that point. Plus, you might could get 10% down on each of them and have the tenants work with a credit repair person.
Just a thought.