Need Advice/opinions On Deal
Need advice for a 12 plex apts. I need to do rehab on 1 building There are 3 buildings with 4 apts each but one building has fire damage. But the property is being bought under the value of an 8plex. So the cash flow is there as an 8 plex
8 units are presently rented at $2750 mo. So there are only the 4 units, one building which is affected by fire. In these 8 units 7 are 1br and 1-2br. In the 4 in the other building 3-2br and 1-3br. and they were rented at $1500 mo before the fire. So you can see the potential and future cash flow. It is a rehab but is bring in the $2750 while fixing the rest.
The after expenses when all 12 were up and running was $22,914.00 for 2004. The one building in question would take between $20-$30K to bring back, redoing all 4 units even though only 2 are affected by fire, the other two only had smoke damage.
I can pick it up for $115K. So in my opinion as an 8 plex it would be a good deal. And the other building with 4 apts is thrown in for free.
I am not sure if I can only go after rehab money or if lenders will loan based on the 8 units rented and see the other building with 4 apts as future income.
Any advice and opinions would be greatly appreciated.
And does anyone know any lenders who will work with this.
I haven’t had the same experience that you have, but would assume that many lenders would finance the property. After you have bought the property, would get a second mortgage on the property to do the repairs. $115k is pretty good for the cash flow you are talking about for the 8-plex alone.
I signed the papers last night. Purchase at $145K with $25K concessions and seller carrying a $20K note to help with rehab money on the 4 units that need to be redone. Have the 12plex locked in and now on to finding the financing that will work with this. It is cash flowing now and the 4 units in the future getting back up will make it a nice investment.[ Edited by RobertR on Date 09/01/2005 ]
It should be the rents for all 24 unit due to the tenants pay date being before the 5th etc. If a tenant pays on the 6th you should have received full credit at closing because realistically there is no way for you to notify the tenant that there is a new landlord in that short amount of time. Therefore the tenant will probably send the payment to the old buyer.
In the future word your contract which suits you best such as Sept. rents will be credited in full to buyer for each of unit.
The Tenants already know the property is being sold, their first question is" what will happen to my Lease"
They need to hear from both, the seller and the buyer, seller infoms them of the anticipated closing date and buyer sends them a Welcome letter with instructions as how he expects the rents to be paid. Assure them that you are assuming their Leases as written.As the Leases come up for renewal then you can change them and if you do have these intentions then I would give them a notice to that affect at least 60 days before the termination date of their existing Lease.
As far as the prorated rents the seller deposits the rents in escrow as of the date of closing. If your closing is on the 22nd lets say you get 8/9 days of the rent for the remaining of the month. If any of the Tenants have not paid their rent yet for the month you either assume the loss from the date of closing or you ask the seller to deposit in escrow that amount since it was his responsibility to collect. Since you are buying rented units you are buying Leases. No seller will refuse to co-operate and take a chance on loosing the buyer.
Cost replacement value is one way, or you could do a pro-forma based upon local rent rates to see what the potential cap rate is, but I would be very conservative on an estimate this way. Also try getting some recent comps or have it appraised. Good Luck....
Yep, Comps and/or Appraisal is your best bet.. But it seems that the property doesnt have a good track record.
If this is such a good deal I would go as far as trying to contact the previous owner that actually operated the building. When you check the Deed Records it should give you the name. He has nothing to loose or to gain so your chances of getting honest answers are very good.
Konte
Well I answered this once before here:
http://www.thecreativeinvestor.com/commercial/modules.php?op=modload&name=Forum&file=viewtopic&topic=43482&forum=31
It really makes no difference whether its an apartment building or an office block.
This club has lots of mentors for you, when you see your first opportunity just let us know. You are on the right path.
Konte
Find a local group and start attending meetings:
http://www.thecreativeinvestor.com/commercial/Groups-index.html
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