Outside of the down payment, I'm trying to calculate how much money I'll need to have ready upfront in order to purchase a 12 unit apt. I know the exact numbers will vary dependent on location, season, etc. But could someone toss some numbers out for
- Legal review
- Tax/Insurance pre-pay (is it 6th months? a year?)
- Anything else I might be missing.
Seems like it really adds up. Thanks in advance!
Depending on state, doc stamps. Loan origination fee. Possible survey if lender requires it.
Time will cost most , for a complex deal
or a pretty easy and low cost for a straight cash deal
@Steven Kleppin The costs vary but here are a few rules of thumb that we use to start with until we get more into our due diligence.
Appraisal - $3000
Inspection - $250/unit
If the building is older than 1972, lead paint inspection - $200/unit
Title processing and search - $900
Legal fees (for syndication) - $8500
Total lender fees and reports - $6950 (includes appraisal cost)
Title/closing attorney fees - $3000
Survey - $600
Title recording - $207
Reserves will be determined by your lender and insurance company’s requirements and tax jurisdiction.
@Steven Kleppin depending on the size of project just estimating from a conservative standpoint you will need at least 50-100K Again depending on the project you may need 150-250K upfront. We're in an 88 unit deal right now where our up front cost risk of capital is north of 230K+ and that is including all 3rd party reports. Hope this helps
Thank you @Matt Engle . What's the purpose of the lead inspection? You can be pretty sure it exists dependent on the date of the building, and once you know you're required to disclose. Correct?
What's the benefit to you for conducting it?
@Steven Kleppin If someone were to get lead poisoning living in the building you would be liable for the medical bills & all other costs associated. This is at least true in my state, but you may want to confirm about where you are purchasing.
@Steven Kleppin it will help you understand the remediation costs that are associated with it. When we underwrite a deal we need to know the capital costs that will be required because those have a big impact on the returns as well as the viability of the project as a whole.
Typically looking at 3% of the purchase price in total closing expenses, DD fees, etc