1. I'm sure a small local bank would be willing to do a blanket on these, would just require some calling around and talking to the right person.
2. Varies depending on what the investor is looking for.
3.You're not ready for this if you have to ask that :) There are a ton of things you can search for on here that will answer that.
4.See # 3.
5. See CL for the local area, compare local rents, this is very local.
Sorry if that comes off as harsh, but don't bother with all of these things if you don't know whether it is a good deal or not. Post the purchase price, rents, expenses, etc... and then we can help you determine if it is that first.
Investor · Charleston, SC · Member since 2015 · 54 posts · 11 votes
10y
Hi guys,
Definitely not trying to offend anyone or try and wholesale any deals.
Here are the specifics;
Contract price:$750,000
Rehab cost-$80,000-$90,000 for all 8 units. 10K/door.
Rents: all 2 bed 1bath. $700 each 12 out of 20 occupied.
Expenses: nothing by the previous owner. 81 years old and didn't keep barely anything. So I'm using the 40-45% rule of thumb. They are going to be less than that since it's seperatedly metered and no common areas. The only expenses on the owner are:water,sewer,debt,taxes,insurance,maintenance and vacancy rate, loss to lease. Etc. (I'll be self managing and doing most of the small maintenance).
I know what to look for in inspections, just trying to start a dialogue with folks on here so I left it pretty basic and open ended.
Rents are below avg for the area, since I'm a local realtor and work with other investors.
Proforma rents are $725-$800 for 2 bed 1bath. TH style APTS.
Vacancy rate in the local area is 92-95% with small inventory under $1,000
Doesn't it just mean that he has a deal locked up and is doing his due diligence before moving forward or getting out?
Unless he holds a Purchase Contract, a wholesaling contract locks up nothing - - any or all can be sold out from under the wholesale contract. Why? Because he's not on title.
Real Estate Broker · Shirley, MA · Member since 2014 · 305 posts · 211 votes
10y
Maybe I am unfamiliar with the law in California but if I have a contract to purchase the property itcannot be sold out from under me while that contract is in effect. If it were the way you say it is a P&S would mean nothing.
Investor · Orlando, FL · Member since 2016 · 1k+ posts · 780 votes
10y
Yes you can as long as the owners are the same and you have 1 contract for all of them.
I think you mean occupancy rate is 92-95% right?
What is the area cap rate for this type of asset? What class is it?
So the purchase price is $750,000 for 20 units? that equals $37,500 per door. What is the area market selling for on similiar properties on a per door price? The income is an average of $750 X 20 units x 12 months = $180,000 - 45% expenses = $99,000 / 20 units = $4,950 per door if all units are rented. That makes this a 14% return on investment if you look at it from a per door basis if you pay all cash.
Investor · New Orleans, LA · Member since 2014 · 1k+ posts · 944 votes
10y
I looked into something like this, but for 9 units. It was 4 duplexes and one SFH, but they were all on the same parcel of land. I didn't go very far on it because I got outbid. But one bummer I ran into was, even though they were all on the same parcel of land, because they were separate buildings, they each needed their own insurance policy. Which in NOLA, if it is being financed, means expensive because you have to have both named storm coverage and flood. And if they all burned down or got washed away by a flood together, that's also a separate deductible for each one.
It sounds like you already have the insurance figured out, but just wanted to throw that out there if you hadn't run into it. With that said, even with sky high NOLA rates, the numbers still worked out great.
The two banks I spoke to said one loan for the multiple buildings was fine and, in fact, would have to be done that way because it was the same land parcel. But if it hadn't been, I'm not sure if that would have changed their answer.
Investor · Orlando, FL · Member since 2016 · 1k+ posts · 780 votes
10y
You said it currently is occupied at 60%. This should induce some investors. Talk to them about the price per door to buy this property compared to the price per door that has sold. Also tell them current rents are below market. After the rehab is completed then they should be able to generate $750 month X 20 units at 90% occupancy = $162,000 NET Income - expenses (45%) = $89,100 dollars a year in income at market rates. This computes to a 12 cap. But if you want to make some money you have to sell it for more than the $750,000 which lowers the cap rate.
Let's recap your current situation: Current income is $700 month X 12 units X 12 months = $100,800 - expenses (@ 45%) $45,360 = NOI $55,440.
This purchase puts it at a an 8 cap. Not a good investment in my book especially if the market is selling at a 10 Cap. But you may be buying it for cash flow.
How much of a down payment are you putting down? Where are you getting the rest of the fund to buy it?
Investor · Charleston, SC · Member since 2015 · 54 posts · 11 votes
10y
@Jennifer T. Yes it is 60% occupied. I agree with in regards to the cap rate, that's my pitch to investors and also the ability to raise rents after rehab and having a low available inventory for rentals. It's also close to an area that's bringing in 4-5K jobs in the next 2 years. In my opinion the triplexes are worth $150,000-175,000 each. There's 1comp next door that just sold for that. The 6-plex is worth 300,000-$350,000. And the 8plex is worth 400,000-$450,000 once rehabbed and rented. That's a total of $1M-$1.1m I will refi at that point and pay all investors back.
I want to keep this as a cash flowing property because of the how close it is to my home and the long term appreciation possibility.
2banks have told me 25% down. I'm trying to do 20% down and $80,000 for rehab.
My first way for the funds is investors with a 10% ROI annually plus 5-10% equity. 2nd my own funds or 3rd a partner.
Investor · Orlando, FL · Member since 2016 · 1k+ posts · 780 votes
10y
No I'm not because of where it is at. I only invest in MF in my area. But there are lenders that I work with that can do 90% loans on purchase and rehab as long as the total amount loaned is 70% of ARV or less. I'm sure they will loan you the money in your area, as long as you personally qualify. Do you want me to give you that info?
Real Estate Investor · Charlotte, NC · Member since 2017 · 2 posts · 1 vote
9y
Carlos, just curious. DId you do the deal? How is it so far? I am a relatively new real estate investor looking to learn about the real estate market in Charleston.
Real Estate Broker · CA · Member since 2016 · 243 posts · 226 votes
9y
If the parcels are contiguous then you can just do one loan best terms no hoopla. If not the blanket will cost you more almost every time, and you are just better off with multiple loans.
The credit union did 1 blanket loan for all 20 units. Once we stabilized the property we will refi and pay back investors at 10% return fixed. And enjoy the cash flow. Hopefully!
Real Estate Broker · CA · Member since 2016 · 243 posts · 226 votes
9y
Carlos 5.5% on the blanket? That's a good rate for that. My point was still likely higher than doing them individually full doc but I understand the reasoning for both ways. We just did three loans simultaneous close each about 100 yards from the next. We decided to do 3 separate loans for best terms but it was a lot of work. 3.76% on 3/1 hybrid arm no balloon though.