27 unit

[JBJR]

I need help putting this deal together, 27 unit in decent (not great, but definitely improving area) asking 1.25MM,

Rents  156K
Operating Expenses  61K


Is this anywhere near  a doable deal??

[kbird]

Here's the down and dirty shortcut I use for figuring an offer for multi unit properties:
Monthly income * 50 = Purchase price
So, I would want to pay roughly 650k for this property.
This is a fairly conservative number, but I like it that way!

With 95k/year net income, BEFORE management and vacancy, cashflow will be slim to none with a 1.25M note, taxes, and insurance. Commercial loans also usually require 30% down, so if you don't have the cash, you'll need a private lender or some form of owner financing.

Good luck-

[primeproperties]

Hi,

I agree with kbird.    
Even with a Lender who accepts 10% down on a commercial loan, your debt service (mortgage) would be a LOT higher than your income.    :'(

Good luck.

Cordially,

Joyce     :multiflash:

[silver]

I agree with kbird and primeproperties.
Also If the property appraises high that can help too.
The LTV has to at 70% if you are putting little down.
However some will accept 75% ltv if the transaction makes sense.

[Keratoid]

Like most investments, commercial properties have several moving parts - especially one with 27 units.
1) how do the rents on the individual units compare to the surrounding area. Can you increase the rents?  
2) what is the current vacancy rate in how does it compare to vacancy rates in the surrounding area.
3) What is the condition of the rental units? Deferred maintenance can be costly!
4) Who are the tenants, their payment history, personal problem history (ie.  have the police been called to stop a fight), are they  nuisance tenets that call to hear themselves talk?
5) Investigate every Lease. Can you live with the terms?
6) How does the property compare to the surrounding areas, is there curb appeal?
7) are the expenses reasonable or is there room for improvement at minimal expense.
8) What is the insurance claim history of the property?
You can have a building that shows that positive cash flow yet is a troubled property that gives you nothing but headaches.
You can also invest in negative cash-flow property that with minimal effort, time and/or expense can be the proverbial goose that lays the golden egg.

We recently bought a five-story 40,000 square-foot office building with a 60% vacancy, below market rents short term leases very good tenants and a negative cash flow for $450,000.  Within two months we leased two floors to a single tenant bringing our vacancy to 10%.  Within six months, we refinanced, paid off the previous owners note and pulled out $1,285,000, part of was kept as a slush fund with remainder returned to the investors. Additional cash flows were achieved through bringing rents to market, leasing roof space for a cell phone repeater antenna and billboard.  We reduced expenses by replacing all the old single pane windows with energy efficient uv solar tinted dual pane windows, retrofitted the HAVC and lighting systems.  The building now has a strong positive cash flow with a 18% vacancy.  Eighteen months after buying it we are about ready to refinance it again or sell it for a handsome profit.