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Adam M.
  • Investor
  • Texas (DFW & West Texas)
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86
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What do you think of this deal? Financing headaches...

Adam M.
  • Investor
  • Texas (DFW & West Texas)
Posted Feb 28 2024, 08:00

Howdy BP,

Kindly seeking advice & feedback on a deal we have privately received as of late: not sure to ditch or ride the storm!

It is an off market, value-add, 6-unit multifamily complex with spacious units in a part of Dallas Fort-Worth that is seeing burgeoning growth, going for $575,000.00. 

Rents are 800-900 and really should be 1,200-1,400. 

5/6 units are occupied and are fetching meagre rents considering what is happening in the area. The initial business plan was to renovate and turn units to get them to market rents on a 2 year hold with a refi EOY 2. The asset has great potential and is in need of a severe makeover (mainly cosmetic)... there are duplexes in this area that have sold for the same price point with similar units.

This deal is a JV with a fellow investor our firm is close with.

Where we are tripping up here is finding financing that makes sense! 

We have financed everything to date with our own capital but are quite illiquid at the moment given other projects we are working on, hence the JV. We have no problem with 1-4 units and know how to finance larger complexes (anything with a loan product larger than 1MM). 

What we have never done before is finance something in this weird middle ground. It's a small commercial loan for 5+ units, but also, too small to qualify (from what I understand) for fixed rate agency debt? 

There is a similar complex nearby which we know was closed with hard money... we really don't feel comfortable going the hard money route just because the products I've seen (so far) on an asset like this are borderline usury territory (!) 

Are we missing something? Are there hard money lenders (or other) out there that people have used for deals of this scale? Even with a refinance... what do you even refi into!  So many questions on the lending side. 

As much as we see the potential in this deal, if we cannot find good lending we will have to let it go. We also do not really want to go down the whole personal guarantee, W2, tax return, credit score route... or is this something we will have no choice with without hard money in this climate? Are there any asset based lenders that can take something like this down given it has solid cash flow? 

If you have read this far, thank you and any feedback/advice that can be provided will be massively appreciated by my team and myself. 

Hope everyone is having a positive Wednesday and looking forward to discussing some ideas,

A

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