How can I buy this 19% CAP 7-Unit MFR without cash or living there?

[Taylor Jennings]

The subject really captures everything...

There is a 7-Plex that is being offered for a great price with 19%+ CAP and fully occupied bringing in over $3k cashflow/mo.

Not sure why the owner wants to get rid of it, but I think he's just wanting to get out of the landlord business.

Can I get a conventional loan for this and maybe do seller financing for the down payment to the bank?

Will my Mortgage Rate be higher since I'm not living there?

Costs increase for the same reason?

How should I proceed?

Thanks for taking the time to read this post and replying!

[Joel Owens]

I doubt the numbers. While I have seen numbers like that posted before when I audit everything the cap isn't anywhere near stated returns.

Sellers will say anything to try and sell a property. 5 plus units is commercial so debt and types of loan will be different from 2-4 units.

I would verify numbers before doing anything else. Whether it's a deal and what financing you could get and it's value depend on hard numbers.

Quick and dirty value is this.

Ask the seller if they pay water, etc.

If landlord pays utility use 60% annual costs of gross rents and if not use 50%. Verify the numbers are actual rent received. For example market rent for the 2 bed for the area is 675 but the seller is claiming 700 which sounds high. You audit the numbers and find the seller gave first months rent free to get tenants in.

So 700 rent X 12 months = 8,400
Take 700 rent x 11 = 7,700 / 12 months = 641.67 ACTUAL rent per unit

Let's say rent is verified actual 700 unit X 12 = 8,400 X 7 = 58,800 gross rent

58,800 gross expected rent X .40 (60% costs) = 23,520 NOI at a 10 cap is a purchase price of 235,200 or 33,600 a unit. This does not include immediate repairs needed.