Thoughts on first deal
So I'm getting close to my first deal. I've got two partners, we're forming our LLC this week, and working on a Contract for Deed for a seller-financed 8-unit that is off the market.
The tax assessed value is about $310k and we're getting the property for $250K with 10% down on the CD, with interest at 1% over what the seller's note is at currently, I believe we'll be in the 5-6% range, not sure on amortization yet, but it'll be a 5 year balloon.
The property is currently 100% occupied (no leases, tenants anywhere from 1 year to 20 years in their units), and roughly 20% under market rents. Even below the market rate, its currently about a 9.5 cap. Our goal is to cycle some of the units, do some minor rehabs, and get the rents up to market rates in the first year. When we get our rates up, we'd like to refinance with a bank at 20-25% equity with a (HOPEFULLY) 325-350K valuation and pull out our initial cash so we can move it to another property.
The questions I have are:
1. Since this LLC is new, how tough will it be to refi a CD into a commercial mortgage to pull out the equity?
2. The quick math I'm doing tells me that I'd need to get 20% down at 325k appraised value, or 25% on 350K to get nearly 100% of our initial 25k out and pay off the CD while covering closing costs. Does that seem realistic?
3. How reasonable is it to hope that we can get the higher valuation of the property when it comes time to refi in less than a year? I've called an appraiser I know to see if they can find any comparables, but there really aren't many 8-unit transactions happening often in my market.
4. When refi-ing as a commercial property, what is taken into consideration for the valuation? I'm assuming comps, real-age, repaired-age, revenue, and of course an appraisal. Where could I focus our efforts in the next year to get the higher valuation?
Thanks for reading my long post, anyone who made it this far. Any input or help would be appreciated.