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Joel Florek
  • Rental Property Investor
  • Michigan City, IN
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16 Unit Complex on a Lake, I want to Buy It!

Joel Florek
  • Rental Property Investor
  • Michigan City, IN
Posted Oct 8 2015, 10:17

First, some background info! 

I bought a 4plex in my small town in the upper peninsula of Michigan earlier this year and things are going great with it. Just finished renovating my only vacant unit and had 3 calls on the first day posting it for $700 plus electric. I will have a tenent in at the end of the month given everything check out ok. This 2 bed unit is in nicer condition, but lacks amenities that other properties offer like carports, decks, storage space, or a backyard. Market rents are closer to $600 or $650 but there is a lack of supply in my area so people are living with friends until they can find something. This property will provide me roughly $800 a month in income after all expenses including 100% financing on the purchase price. I renovated with my own cash. 

Needless to say I am confident in this market and in my ability to manage and maintain larger properties. 

The Deal

Looking for the next deal I found one through my carpet installer on a 16plex that just went up for sale(not on MLS, only through the owners). It was actually one of the buildings I said "wow, I would love to buy this!" when I was doing my research before investing in this area.

The building is 16 two bed units all with decks or porches that overlook a small lake/fishing pond and neighboring a park, car ports for all tenants plus 6 storage units on site for tenants. Full occupancy at $600 to $650 per unit with all utilities sub metered. The building is 20 years old and no major items need to be addressed from an initial walk around. Land is 3.7 acres and has room to build a 5 unit condominium that was planned by the builders who originally built and still own this property. 

After inspecting the finances the property is currently bringing in $115,000 a year with $38k to $40k in annual expenses over the past 3 years although I would probably have 10% increase due to some special deals they have set up. Operating income therefore is estimated to be $70k this year which includes all expenses except for financing and property management outside of the resident manager. 

Needless to say, running the numbers this property makes sense at a price point of $700k, although I would prefer to be at $600k or $650k. Its not a steal, but its a quality property that will always rent before any other building in my area and has the best overall amenities over any property of its kind in my area. 

I want to purchase this property but need to find $80k to $100k to close the deal with the bank which currently holds the loan on this property(bank loves this property and wants to hold it so the president has mentioned he is willing to require less down). I also have my loan through this bank, so the do know me as a good customer and worked with me to get my first deal.

I have a few ideas of ways that I could make this happen, but dont have all the details figured out yet. Please provide me with some suggestions as to how you might try and capture this deal with as much details as possible! 

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