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

[Account Closed]

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!

[Michael Seeker]

Originally posted by @Account Closed:

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.