How can I use creative financing or raise capital for a $6.5M 100unit Muti w GRM of 8

Question

How can I make this deal happen? Do I need partner/partners. Is it even possible at this stage. I am just getting started in investing. I'm a licensed Agent in Illinois for just over a year. I don't have an LLC yet.  And this lovely looking opportunity just popped up. It's a very rare deal for this area. 100 unit property well maintained.

Gross rent multiplier 7.8.

List price is $6.5 million and the

Annual Net operating income $415,000

Cap Rate 6.4

60% of residents are grad students

Help!

I understand it may not be possible but I'm not interested in that reality, I'm interested in the one where there is a way.

Brian Wilson · Answer

As someone new to the multifamily space (outside of 2-4 units) I can confirm that this deal is to large for you. Think of it from this perspective. If I were loaning you the money what would I want to see? Experience. If we were talking a 16-24 unit and you hade some duplex's and SFH I could see someone making the leap. However, without having any experience that can "count" I would say you would need an experienced partner to sign their name on the deal/loan. This is costly (can be worth while) but may be a solution assuming you have those individuals in your contacts. Aside from that are you prepared to manage or vet a manager of an asset this size?

If you want help selling the lead let me know. I have a few larger buyers that handle the stuff we can't. You can also advertise it on here. You could make some money as a finders fee or you do it for free and build a good relationship with someone who may JV or mentor you on a deal more size appropriate.

Good luck!

Chris Seveney · Answer

I read "just getting started" and list price "6.5M" - stop there. This is not something you should be considering with no experience. If you know other investors, you could bring them the deal with the caveat you get a piece of it and can use that for learning.

John Warren · Answer

@Millon Blackshear where did you find the deal? Was it on market? MLS? It is highly unlikely that someone that is new to the business will stumble on a deal this size that hasn't already been passed over by a lot of local buyers. That is the dirty little secret in the multifamily space. All of the larger deals are brokered, and generally are brokered well. In my opinion, there is more opportunity in smaller deals for them to be mis marketed or distressed.

If you want to jump into commercial RE investing, I would start a little smaller. Maybe partner up and buy a 6 or 8 unit building. These can be very lucrative, and they help you answer a lot of the questions you had (who lends on these, how do you get experience, etc).

Sam Yin · Answer

@Millon Blackshear

This is a dangerous deal if you do not already have a lender network. The best bet to make this deal happen and still take part of it is to find someone with experience and tag along. Either move the deal over to them, ask to shadow or have a small stake.

When you start getting into deals of this size, you need to think about payroll and fulltime managers. There are a few more moving parts than a 8 to 10 unit deal. The Lender will need your resume AND your Property Manager most often times.

Millon Blackshear · Answer

thank you, I appreciate all advice and comments.

James Ihssen · Answer

You will definitely need some skin in the game to make this deal happen, no matter how creative you get.  With that being said, I would not be particularly excited about a 6.4 cap on a 100 unit multifamily, even with a large amount of capital improvements already completed...

It is good to think big though, there is nothing wrong with that.  I have always said that the problem is not with people hitting their goals, it is with people not setting large enough goals in the first place.

Kudos to you for thinking big!

Caleb Brown · Answer

I don't think you'd be able to tackle it. BUT you can find a buyer and get a commission or negotiate instead of your commission you get a % of the rent and when you sell.

Millon Blackshear · Answer

I can't post my email here but that sounds good. I also have a separate question about Building. Do you have any experience with developing 55+ adult communities? What is the funding process for that?

How can I use creative financing or raise capital for a $6.5M 100unit Muti w GRM of 8

Most Popular Reply

Contact Us