Best way to Finance this deal...

[Mike Brown]

I recently found a deal that I need help structuring from a financing standpoint:

Here is the deal:

52 unit, 25% occupied, Asking 700k

Repairs needed: 7 - 10k per door

Average rents: $500 - 700

Working with about $200k

I am wondering if hard money is the way to go.... Any suggestions

[Joel Owens]

Mike,

700k / 52 doors = 13,462 door before immediate capex

Are these 1 bed,2 bed units and how much sq ft?? 25% occupancy is low and I wouldn't count that income at all. Probably be spending money getting these people out. If the area is good it might be worth a shot.

7 k to 10k is typical on that kind of occupancy for rehab. if they are gut stud jobs likely would be 12k a unit.

If rents are 500-700 then go with 450 to lease up fast upon rehab to the most qualified tenants from tons of applications. The name of the game is to get filled up fast and stabilize and then sell or refi off 1 to 2 years later.

450 X 52 = 23,400 month X 12 = 280,800 gross expected annual income.

Back off 50% costs if landlord doesn't pay water or utilities. 280,800 x .50 = 140,400 NOI at a 10 cap for resale that is 1,400,400 before resale expenses.

700k + 52 units let's say 10k a door rehab = 500k 700k purchase plus 500k = 1,200,000

You would really have to nail down cost per door rehab and the exit cap and lease up rent. Ideally you need to get this purchase price down a few hundred k to make it worth your while.