Posted by JoeS on January 09, 2003 at 10:56:36:
I really appreciate the information. I will find out more details on the property and contact you if it still makes sense.
Looking for opinions on possible commercial deal - Posted by JoeS
Posted by JoeS on January 09, 2003 at 08:06:02:
I was hoping to get opinions on a possible commercial deal. I put this in the financing section since I really want to know if finding financing for this deal will be possible with very little down. The property has 14 units currently renting for $500 a month. The realtor says the rents are low and could easily be raised to $600 a month. The seller wants $289,000 and is willing to carry a second mortgage of 10%. So I’m assuming I would have to come up with another 10% since I think most loans for this type of property would be at 80% of purchase price. Is that true? Is there any way I can come up with the additional 10% or get a loan at 90%? Also any input on the rental numbers would be helpful. Thanks!
Re:Looking for opinions on commercial deal - Posted by Ed Garcia
Posted by Ed Garcia on January 09, 2003 at 09:45:53:
Joe,
This looks like this could be an exciting deal but I need more information. My suggestion is to answer the questions that I give you and call me at (909) 944-0199.
Here are some basic questions I ask when doing Multiple units to help me analyze the deal.
(1) Describe The Units and the surrounding area?
(2) How old are the units?
(3) What’s the unit mix ( how many 1 br. 2 br etc)
(4) What’s the vacancy factor in the area?
(5) What is the gross income of the units?
(6) What is the vacancy of the units?
(7) What is the NOI?
(8) What are market rents in the area?
(9) Are there any other Units in the area for sale?
(10) If so at what Price?
(11) What are the going Cap rates in the area on multiple units?
(12) Have any other Units in the area recently sold?
(13) If so at what price?
(14) How much does the seller owe on the units?
(15) If there is a loan, is it assumable?
(16) Will the seller carry a second?
(17) Is there any differed maintenance?
(18) If so, estimated cost of maintenance?
(19) How’s your credit?
If you answer these questions, then I can answer yours, with a meaningful answer.
Otherwise, it’s just, What ifs? or hypothetical.
Ed Garcia
Re: Looking for opinions on possible commercial - Posted by Charles Clark
Posted by Charles Clark on January 09, 2003 at 08:55:15:
Hi Joe,
Depending on your credit score and your assets, you may be able to qualify for a 95%LTV on a N/O/O, non owner occupied, loan. Most all investors are going to want to know where the money for the down payment is coming from, so prepare now to “season” the funds. That means that you need to put it in a bank or mutual/stock fund and leave it there for 30 to 60 days, depending on the requirments of the investor.
Charles Clark
Re: Looking for opinions on possible commercial - Posted by Ed Garcia
Posted by Ed Garcia on January 09, 2003 at 10:02:07:
Ckark,
I’m sorry but I disagree with your answer. First of all your answer is applicable on 1 to 4 units. After 4 units we enter to another lending community.
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It’s not impossible to do 95% on a small deal like this if you’re working with a small bank who you already have a relationship with. The reason is because this deal, if the information is correct is under market and has great up-side potential.
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However when you speak about NOO, once again this would be inapplicable with 14 units because as the rule of thumb, investors do not purchase these properties to live in. They are not analyzed with the same type of debt ratio you would on 1 to 4 units but are analyzed on what we call a debt coverage ratio. When you’re buying this type of property you buying a income stream and the values are based on the income.
However if perhaps I’m in error, then please share the lender that you feel can do this deal or any deal that is multiple units (meaning more than 4) under the circumstances that you have given.
Thank you,
Ed Garcia