40 Units - Help With Offer
Ok - my goal here is to acquire a 40-unit apt building with little moolah out of pocket. Here's what I'm thinking:
Ask: $2.6M
GRM: 9.01
CAP Rate: 8.69
Assumable 1st mortgage (bal unknown) at 5.625%. 2 Years left on the ARM.
I'm thinking of offering $2.2M, assuming 1st, bringing in new 2nd to 90% and then asking for a repair allowance to reimburse my entire down payment.
The deal will look like this:
GRM: 7.63
CAP Rate: 10.27
This thing will cash flow $75K/year after taxes. It needs work - mainly cosmetic as far as I can tell. It is offered as is.
Questions:
1. Can you successfully use a repair allowance to cover your entire down payment?
2. Thoughts on assuming the mortgage vs. bringing in a new 1st?
3. Are there any rules with a 1031 exchange (the seller has planned) that would kill a deal structured this way?
Typically repair allowances are held in escrow account to insure that are actually used for repairs.
Mantis thanks for the feedback. I made my offer as described above and they flat out laughed at the time. But lo and behold I got a call today from the listing agent saying that the seller will agree to 5% down and a sales price of 2.2M but no way on the repair allowance.
So now they are "motivated".
The assumable loan at 5.67% has a balance of $1.56M. Essentially my offer before was for $2.075M due to the repair allowance I requested. And she's not willing to carry back anything.
I'm thinking of offering a straight 2.1M, assuming the 1st and bringing in a partner with cash to cover the down of 5% and bring in a 2nd of the remainder.
Thoughts?
I know this is an old thread, but could someone please respond. Also to the thread starter, what was the outcome? Thanks so much!
I know this is an old thread, but could someone please respond. Also to the thread starter, what was the outcome? Thanks so much!
So did they get another buyer, and if so, how much did they get?
They pulled it off the market and did not sell.