Posted by Ed Garcia on June 28, 2001 at 10:43:54:
Angel,
Just for you to know, a REIT would not look at this deal because of the numbers, and the deal is too SMALL. By the way, lets make that phone call tonight.
Ed Garcia
$1.5 M Deal, Need funding - Posted by jeff
Posted by jeff on June 27, 2001 at 21:37:36:
I am looking at an 18 Unit Building
Asking price: $1,575,000
Revenue: $210,000
Exenses: $36,000
Net Income: $174,000
I haven’t sought funding yet from a conventional lender yet. I have no income and my net worth is nothing much. I am looking for a lender who will borrow based on the property and not the borrower. Can anyone help?
Jeff
Thank you Ed, JohnBoy, & Angel, But wait… - Posted by jeff
Posted by jeff on June 28, 2001 at 13:08:16:
I would just like to thank you for your advice and knowledge. I now understand all that you had to say and created a formular sheet for myself to better evaluate future deals. FYI I am not going through with this, not unless the seller wants to decrease his price by 30% or so. Thanks again.
BTW, what other criteria do you use to evaluate a possible “deal,” besides expanse rate, & CAP?
Re: $1.5 M Deal, Need funding - Posted by Ed Garcia
Posted by Ed Garcia on June 28, 2001 at 10:11:26:
Jeff,
The numbers don’t work.
First of all, if you take the Gross rents that you gave JohnBoy, they don’t add up to the gross rents you’ve given us. But forget about that for now, a rule of thumb when looking at a deal that you think may be in a area of 5% vacancy, is to hit it for 40% expenses right from the get go.
In your post you say “Revenue”, which I take as GI (Gross Income) is $210,000.
So 40% of $210,000 would be $84,000, which would give you an NOI (Net Operating Income) of $126,000. In a GREAT area, a going cap could be as low as 8%, which I would never buy units at, but would make the deal valued at $1,575,000.
A decent cap of 10% would value the property at $1.200,000, and a good deal that would be lets say 13% cap would make the property valued at $969,230 based on the $210,000 income, so you can see that this is no HOT deal.
Jeff, I could go on and on and show you what a wizard I am in structuring this deal, but the reality of it is, that the seller is going to have to be MOTIVATED enough to carry a lot of paper to help you do this deal, based on what information you’ve given us.
Ed Garcia
Re: $1.5 M Deal, Need funding - Posted by Angel Gutierrez
Posted by Angel Gutierrez on June 28, 2001 at 08:44:39:
I post this reply to Jeffrey today, same goes for you;unless you are one and the same,
Dear Jeffrey,
Congratulations! You’re headed for the BIGTIME! However, not with this one. The apartment building in question is best suited for the retail customer like a REIT or some pension fund or the like. By simply taking the asking price and and dividing by number of units will tell you if this is a deal or not. The income to debt ratios you quoted are lame! Tell the broker,that probably told you this is a deal, he just didn’t mention for whom, he should buy it himself. Learn all you can from this one and keep walking! When the owners come down to reality, then sit down and talk. I know this post doesn’t have a whole lot of info for you, but I think you get the idea.
There are too many deals out there, don’t mess with the ones that aren’t.
Hope this helps, now go get 'em! Let me know what happens.
Angel
Dallas, Tx