Thoughts on this Deal

3 Replies

Hi All,

New investor looking for a little feedback and/or constructive criticism on a deal I'm analyzing. This is a mixed unit building, 8 apartments (1BR/1B) and 2 retail offices. Offices are leased up for 5+ years with long term stable businesses. Apartments have historic 100% occupancy. Rents are only slightly below market, $50-$100. Roof and windows were all replaced last year, but older brick building built in 1930. Great location in Chicago suburbs, short walk to public transportation. 

I have attached the numbers and my analysis. Strategy is long term buy and hold for passive income. Numbers below are run with a disposition at 10 years with a 7% cap rate at time of sale. Any help or feedback is greatly appreciated.

Thanks in advance,

Scott

  

@Scott Skinger The loan looks great! Do you have an LOI on the terms of the loan or is it just speculation? If just speculation, I would consider a few other possible loan scenarios because that could change the deal significantly. It looks like a solid deal at face value. Of course, I don't know the market in suburban Chicago so well. Good Luck!

732-333-1477

@Yonah Weiss Thank you for the feedback, I appreciate it! The loan terms are from a Freddie Mac loan commitment based on a $1MM+ loan. 30 year amortization, 10 year payback (see attached). The loan quote shown is based on a $50K higher price, I would offer $50K less so the loan would be right at $1MM. I forgot to factor in the interest only portion for the first 3 years...that will make the CoC returns even better. The only thing that I don't understand is the "Prepay during Fixed, Floating" terms. I'm assuming that it is defining what prepayment penalty i will have to pay if I pay off the loan early but I'm not sure how to interpret it. Anyone have feedback on this? Thanks again!

-Scott

@Scott Skinger Let me explain, For Option 1, the prepayment penalty will be Yield Maintenance, Option 2 is a Soft Step Down prepay option meaning that in the first 2 years if you refinance or sell you would have to pay a prepayment penalty of 5% of the unpaid balance of the loan, then 4% in years 3 and 4, 3% in years 5 and 6 and so on. Option 3 is our Modified Step Down prepay option which is a 3% prepay penalty in years 1-3, 2% in years 4-6, and 1% for years 7-10.

I most likely put this quote together, I am assuming the broker selling this property provided this to you because your name does not sound familiar? I can't remember which property this is for, feel free to PM me, I can help you with any questions and get you an up to date CBRE Freddie SBL quote. Pricing might have changed depending on how long ago this quote is from.

Thanks Scott

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