64 unit complex under contract
I posted on the multi-family forum a month or so ago regarding the multi-family 50+ unit market heating up. We've lost out on many offers from buildings ranging from 20-150 units. I've been mainly focused on Cincinnati where I was born and raised after investing in St. Louis for 4 years. However I had a deal come across my plate near several of my other buildings in St. Louis that just made sense. It's a stabilized building with several years of occupancy around 90%. It has some deferred maintenance that we will handle in phases as my construction crews have time. The good part of the deal lies in this...
We negotiated a deal with a 10% seller carry at 5% interest rate. I have two really good relationships with local banks that are willing to go to 80% LTV along with bundling in rehab costs. They will also allow the seller 2nd bearing that we still make debt service. Our primary lenders are quoting rates around 4.25-4.5%. If everything goes well we could be in the deal with only 10% down plus all other associated costs and capital needs. The banks don't even require a phase 1 or property condition report (which we will still get). Unless we need to come up with more capital we will take down the property on our own not bringing in other equity investors. This is a very unique situation (in my opinion) and is probably only possible because of our previous relationship (and their current appetite). I remember when they wouldn't even finance a 12 unit building for us (2009). However I kept fighting and eventually broke into the relationship.
The lead came from a broker that I met when buying a complex a year and a half ago. He knew this complex was near my other properties and knew I was interested in buying more buildings (probably from my Linkedin updates). I've been trying to break into the Cincinnati market, meeting the key players however this shows you nothing is better than a proven track record and established relationships. I will keep pounding the pavement in my homeland of Cincy but I'm definitely not going to pass on a good deal in a market where I own properties. I'm not going to get into the deal specifics since I just got the project under contract however here are a few details:
Purchase price - 1.55MM w/ 10% seller second at 5%
Rehab - 100-150k - mainly windows, plumbing stacks and misc cosmetic
Gross rents are around 30k/month
Tenants pay for everything but water/sewer
Instantly appealing the taxes right at closing. I've had great success with this in the past. I use a lawyer that specializes in this and works off of a contingency fee (we pay her 50% of the reduction).
Hopefully everything goes well with due diligence!