8 apartments, hard money purchase/rehab
Ok, you guys tell me if this will work and what else I should be thinking about.
The project is to purhcase and remodel/repair 2- 4 unit apartment buildings. Currently bank owned and vacant. One building is condemned by the city. For some reason they a listed by seperate agents even though they are on the same lot. I have access to a 6-8 month hard money loan so we can offer cash and closing within a matter of days. The plan is to get the property rent ready within 6 months from posession date.
There are 7- 2 br and 1- 1 br. $450/mo is on the low to mid- range for 2 br and $375 is low to mid for a 1 br in this area.
Here's the projected budget I have constructed:
Annual Net Rent: 39,307
50% Expense Rule: 19,654
NOI: 19,654
Cap Rate 10%
After Repair Value: 196,000
Repair/Improvements: (85,000)
Current Value: 111,000
Offer Price: 100,000 cash to close w/in 3 days
Total Hard Money Investment/Loan: $185,000 (purch + repair)
The terms I have worked out are to repay the hard money within 6 months by placing a new mortgage on the property with an agreed purchase price of $203,000. My wife and I plan on holding and running the property for at least 5 years and getting the rent up to market value.
What do you guys think? Suggestions/ideas?
Thanks
Mark