Ed Garcia Help: 36-Units Apt. 75% Seller-Finance

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Posted by VanMD55 on July 18, 2008 at 22:03:08:

I am beginner investor in purchasing multi-units. My focus for the last 3 years has been single-family homes and managing tenants. Now, I am looking for passive cash flow through multi-unit investing.

Currently, I am evaluating a potential deal for 36-units for $900,000 ($25,000.00 per unit)in a college town in TX. The owner is ready to retire, and is willing to finance 75% of the deal @ 6.5%-30 years ammo with a 10 year call.

I need to find a commercial lender and/or private money for the other 25% needed to finance the deal.

At this time, my funds are tried-up in another investment property so I need a Equity Share Investor to pull off this potential deal.

Here are the numbers per the information from the Broker: 92% occupany-level as to date, with most of the tenant-base are college students. The properties are 2 blocks from the college campus.

Income

Annual Scheduled Rent = $ 232,020.00
Less 10% Vancancy & Credit Loss =$ 23,202.00
Net Rental Income =$ 208,818.00
Other Income = $3,600.00
Effective Gross Income = $212,418.00

Expenses

Fixed Operating Expenses
Real Estate Taxes = $15,745.00
Insurance = $ 11,508.00
Utilities = $28,224.00

Variable Operating Expenses = $61,200.00

Note 1: The broker will not forward the last 2yrs of actual income and expense statements until a purchase price is agreed on between the seller and I. So, I would not have these statements until the due diligence period while under contract.

Total Operatig Expenses ($3,241 per unit) = $116,677.00
Net Operating Income = $95,741.00
Seller Financing- Annual Debt = $51,198.00 ($675,000.00 Financed by Seller @ $4,226.46)

Potential Equity Share Investor: $225,000.00 down (25% of the Equity in the property and 25% of the cash flow) with the option for me to buyout the investor in 5-7 years.

Cash Flow = $44,543.00 -$11,135.75 (25% to Investor) = $33,407.25 per year

I think I have a great deal here. With 25% Down, this deal will reflect a CAP Rate of 10.6% and Cash on Cash Return of 19.8%

Will a commercial lender finance this deal or will I have to do private money?

Ed Garcia: Could you recommend a mortgage broker and/or a private lender to assist me on this deal if securing a purchase contract is feasible per the numbers?

Thanks for any feedback you can give me.




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