What to do?

Question

I am most desperate, I live in an area where real estate is almost unknown/slow growth, I want to purchase an apartment complex a half hour away from me but dont have the funds. Some body please help me.

Matt Bormann · Answer

Yeah the seller of the property is the owner. I recently have been getting mentored by someone who owns 3 apartment buildings, and I have know for awhile. It just felt like I had hit a brick wall b/c I didnt know to get financed or how to get credit. A recent idea included getting 80% ltv loan, then blc at 20%. Still doesnt cover the closing costs or due dilligence. So I was hoping to find a partner, or an angel investor to help me cover what I couldnt put into the deal with a percentage of return. Or split of profits.

Jon Holdman · Answer

It sounds like you have no cash at all to put into this deal.  Others have told you what to do -- start smaller.  Even a SFR will be a problem for you.  You just cannot do rental property if you have no cash.  Even if you figure out how to finance the deal, you're going to really be in a bind when something expensive happens.

Dustin Lyle · Answer

Good that your not blinded by numbers though... I often tell my family members about big deals I come across, and they say those ignorant comments like.." you can't afford that" lol If they only tried to understand the value of a good deal, and leverage.. One day when im mentally ready to take on multi-million dollar investments I will.. As should you.. But I have to agree with Mike, Ryan and john, Start small or, well, Start at what your comfortable with... something at a level that's not going to change how you function day to day. Then one day you will realize how far you have come from where you started. Good luck to you Matt..
Dustin

John Chan · Answer

Yea, I agree with Mike. It doesn't seem like a great deal to me. You mentioned that this deal is in upstate NY, which is usually more lower priced cashflow properties rather than high-appreciating areas like lower eastern NY. I'm sure there are much better deals out there.

Michael Rossi · Answer

Matt,

I agree with Ryan that starting with a smaller deal to gain experience would be a good idea.

In my experience, sellers often grossly distort the truth about the NOI, so you will need to verify that.  Assuming that the NOI is correct, here is how I see this deal:

Monthly NOI:  $33,500
Mortgage (30 yr, 7%, $3.75 Million): $24,950 per month

Cash flow:  $8,550 per month

Without knowing what the number of units are, it's hard to tell if this is an acceptable deal or not.  It's only about a 2.7% return on the $3.75 purchase price.

Good Luck,

Mike

Ryan Fagan · Answer

why not start smaller and then build up to these larger deals?

Richard Warren · Answer

Why not start by posting the specifics of the building you want to purchase?  How much?  How many units? What are the rents and expenses?

:cool:

Matt Bormann · Answer

I did post on another forum regarding the financials, almost willing to walk away because the broker notified me that the seller isnt willing to put up 5 year tax return. But at a price in upstate ny at 3.75 mill, NOI 402K, its a great deal. Even though the seller has 800K left on loan.