Posted by Ed Garcia on July 18, 2008 at 06:39:20:
In Reply to: Small Commercial Deal posted by Brandon on July 16, 2008 at 21:03:13:
Brandon,
You shouldn’t need a Hard Money Loan. You already have $5000 dollars. Borrow another $3000 from your parents who you’ve already said will help you. Ask them to sign with you on a loan that you want to get from a small bank for about $32,000.
The deal will be structured as follows,
Purchase Price $80,000
10% down = $8000
50% seller carry-back = $40,000 which is the amount that you’ve said that you feel the seller will carry, keep in mind you’ve got to convince the seller to carry back in second position.
40% bank financing = $32,000. My suggestion is to find a small local bank in the area.If your numbers are right, you’re getting about $375 per unit which will give you a gross income of $3375 or $40500 annually. If we take off your utilities and hit the building with a 10% vacancy which is what it has currently, on a bad day this deal will have an NOI (Net Operating Income) of $12,300 and at a 10 Cap is worth at least $123.000.
Brandon, I know I could sell this to any small local bank due to it cash-flows beyond expected debt coverage ratios and if your numbers are right you’re buying it at approximately 65% LTV to which the bank will be financing it at 26% LTV.
Good for you, you have a nice little deal here, not bad for a guy going to college. The reason I’m asking you to have your parents sign with you is because you’re going to college and I don’t think you’re showing a lot of income or credit.
If you should have any problem with this deal, call me at (909) 944-0199 and I will walk you through it.
Ed Garcia