Seven unit - 3 building deal analysis- - my first multifamily

7 Replies

Hello all,

  I have come across a potential deal in Fort Lauderdale. I would say this is a C neighborhood and consists of three buildings (two duplexes and one triplex)The house is listed for 525,000 and I reached put for hard money for this loan. I will potentially put down the 20% and have the rest financed. The hard money consists of a 3% consultancy fee and a 3.5% origination fee. They have offered a 10 year term with a 30 year amortization fixed at five years at 4.875% adjusted to the 5 year LIBOR swap plus 3.0% with a floor of 4.375%.

The property is fully rented grossing $6,300 per month. Taxes and insurance would be around 900 a month. There is some minor room to raise rent and using the 50% rule I question If this property is worth it, however; I think I am excited to build a portfolio and an opportunity for hard money and 7 units.

Suggestions? Thanks again!

Woo, right in my backyard. Hope all goes well this this! 

Originally posted by @Nick Britton :

Hello all,

  I have come across a potential deal in Fort Lauderdale. I would say this is a C neighborhood and consists of three buildings (two duplexes and one triplex)The house is listed for 525,000 and I reached put for hard money for this loan. I will potentially put down the 20% and have the rest financed. The hard money consists of a 3% consultancy fee and a 3.5% origination fee. They have offered a 10 year term with a 30 year amortization fixed at five years at 4.875% adjusted to the 5 year LIBOR swap plus 3.0% with a floor of 4.375%.

The property is fully rented grossing $6,300 per month. Taxes and insurance would be around 900 a month. There is some minor room to raise rent and using the 50% rule I question If this property is worth it, however; I think I am excited to build a portfolio and an opportunity for hard money and 7 units.

Suggestions? Thanks again!

Have you quoted the insurance and verified the taxes?  Property taxes and insurance are a lot higher in FL than most other parts of the country.  Is there a reason you're going after what you refer to as a hard money loan instead of a commercial loan?  There are many commercial lenders out there willing to finance these types of deals with 20% down, 4-5% interest rate and no 6.5% in fees up front.  The terms you mentioned sound very much like a commercial loan with the exception of the 6.5% in up front fees which is ridiculous and the 30 year amortization which is a little longer than what I've been seeing on commercial loans (typically 20 or 25).

To the property specifics - are these units all separately metered?  Do you have a PM lined up to manage them for you?  Are they deeded as 3 separate properties or as 1 property with 3 separate buildings on it?  This could make a huge difference for exit strategy and financing options as duplexes and triplexes are a lot easier to sell/finance than a 7-unit property.

Other than that, the numbers sound OK but not great...I don't invest in FL or in C class neighborhoods and have never been to Ft Lauderdale so couldn't say how the deal stacks up against others in the area.

I was wondering the same things as @Michael Siekerka, at least on the insurance and tax question. My husband and I own condos in Ft. Lauderdale, and when we evaluate SFRs or multi's, the taxes, insurance and water/sewer costs are very high - and I say this as a resident of NJ, a state that pioneered high property taxes ;)

We also own 2 SFRs in class C/D areas up here, and tenants in these areas can be very hard on the properties. What do the repairs look like? Or are the buildings/units fully rehabbed?

Thanks for all the responses. I guess in response to @Michael Seeker lol yea New Jersey is very expensive! Do you own just condos down here or SFR?

Originally posted by @Nick Britton :

Can you please explain why different meters makes a big difference? 

Well it sounds like each building should be separately metered so that's a good start.  Ideally you would have separate electric meters for each unit in each building so that the tenant in each unit has to put electricity in their name and pay it and you have no responsibility for it.  If there is only 1 electric meter for each building, then you're looking at quite a bit of money in utilities each month.  You can always have tenants reimburse you but it's just another thing you have to keep track of each month and bill to them, plus it's something else you could potentially get stiffed

@Nick Britton , we own condos in Ft. Lauderdale and the SFRs are in Trenton. 

Aly NA Thanks s much?.. I will look into  this

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