Need Advice on 13 SFR PORTFOLIO DEAL.

5 Replies

13 SFR for $560,000
Market Value. $635,000
Monthly Income: $8,180
Vacancy: 654.00
Monthly Expenses: $ 2,550
NOI: 4,978

Owner is willing to carry.
I m Seeking advice on the rate and terms that I should propose.

I have 10% cash

Thanks

Eric.

First, I would just like to say that I have found it difficult to maintain under 50% expense ratios on SFR of that value. Make sure you can do that. Also, I find that when I buy houses I usually find them needing some initial maintenance.

Your cap rate is 10.7% using your numbers and 8.7% using 50%.  I like my cost of money to be 3 percentage points under that if possible.  That would put the interest rate at 5.7% to 7.7%.

I would prefer interest only and the longest time possible.  You probably won't be able to go to your bank at the end of two years and get new loans on each.

Good Luck.

Bill

@Bill Jacobsen    Thanks for the Reply,   Great Advice on the Expense numbers, and Interest Rates.   How should I handle the banking,  Should I try a portfolio lender or individual loans, 

Most lenders are going to want 25% down.  If the owner is willing to carry 90% that's the route to go.  Rate and terms are whatever you can negotiate.  Long term fixed rate would give you the most flexibility.  But 5.7% per @Bill Jacobsen  is right about bank rate.  I suspect the owner will want something higher and a shorter term or balloon.  A fully amortized loan cuts into your cash flow, especially a shorter term like 15 years.  But it does give you progress toward getting these paid off.  A balloon or interest only loan kicks the can down the road.

Thanks @Jon Holdman  Great Advice...    Guys how should I handle the Initial Maintenance costs, can I use that also as a negotiating tool.  

Initial maintenance costs?  Do you mean rehab that's needed to get it rent ready?  You didn't mention that.  How much is needed?  This deal is going to fall apart if much rehab is needed.  In any cash you're probably going to be out of pocket for that.

Running the numbers, it looks OK if you get the seller to provide a 30 year amortization period at 6%.  At 15 year amortization its cash flow negative.