I have a deal that could start my venture in real estate investment that I love, but I'm not quite sure if it's good or not and would like some help from some gurus here at Bigger Pocket.
PROPERTY(S): 5 Residential Units / 1 Commercial
PURCHASE PRICE: $575,000
Loan Amount: $427,500 ($402,500 Rehab holdback + $25,000 toward Rehab Cost)
EXPENSE DEPOSIT: $3,995
Value at Least: $625,000
Origination: 4% of loan amount – Paid at closing
LOAN TERM: 12 months w/ 6-month ext
TITLE INSURANCE: PAID BY BORROWER
INTEREST RATE: 10.99%
I/O LOAN: $3,912
The property cash flows $7,315 and my expenses would be $6,509.08 = $805.92 (income)
FYI: RE-FI would be 5% either on a 15 yr or 30 yr loan
I have to come up with $172,500 as well as $17,100 for closing & $3,995 Expense Deposit = $193,595
If I can have a second pair of eyes on this deal to help me with any concerns that I may not see. Thanks!
PM for any questions.
Are all units occupied? What’s the breakdown for insurance, money held back for repairs etc? Is that all worked into the final cash flow number?
That seems to be a lot of money up front to only net $805/month.
I’m curious as to what your background is? A 6 unit mixed use property is not something I’d recommend doing as your first deal as there are a lot of components to the deal.
Are there existing leases in place. What’s the rent roll? How long have tenants been there. What condition is the property in. Who will be managing and doing maintenance on it?
@Josh Sohar - The Repairs are worked in the deal ($25k in repairs) - The reason it's $805 a month is that I lack the funding and it's a short-term loan of 12 mo. with a high-interest rate. After re-fi of 15 yrs, I would be cash flowing $1013 and 30 yrs I would be cash flowing $2157 with a much lower interest rate.
@Garrett Hogan - I'm a property manager for a large company in NJ. Can you elaborate on the components you may be talking about?
1. The place is fully occupied 5 apartments and 1 cafe.
2. Rent Roll - NOI = $56,615
3. Tenants have been there a couple of years. - Cafe opened June 2017
4. The condition is fair for the location and could use some upgrades which is what the $25k is for.
5. I will be managing the property with a lot of different connections to vendors.
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