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 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!
@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 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.
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