Deal or no deal???

Question

I am looking at a quad in my area. All 2/1s with w/d connections.  Building is all brick.  It is currently a short sale listed at 200k.  2 units are currently rented for 700 each.  The other 2 should command the same.  Roof & Hvac are 3 years old.  One unit could use about 5k in work.  I'd estimate taxes at 3k.

My situation:  Perfect credit (mid-high 700s), 11k in cash.  I don't think I would qualify for conventional financing because of DTI.  I own a house and condo(rented).

I'd like to make an offer on this but am concerned about funding.  I know 11k is not much and would like to keep it as a reserve.  Any suggestions on an offer price that a HML or private lender would work with me?

Nick Johnson · Answer

I feel that NOO rates are coming down so you might be close. You can always HML to get into the deal AS LONG AS you are approved for conventional financing as an exit strategy. Don't hang yourself out to dry.

Love the book MikeOH! TY!

Michael Rossi · Answer

Here's how I see this deal:

Gross rents:  $2,800
Operating Expenses:  $1,400
NOI:  $1,400
Less $400 ($100/unit/month) desired cash flow

Max debt payment $1,000 per month

With terms of 30 yrs, at 7% NOO, that gives you a maximum acquisition cost of $150,000.  Subtract $5,000 for the needed rehab of one unit.

Therefore, the maximum I would pay is about $145,000.

Good Luck,

Mike

Jim Doine · Answer

If you plan to flip this property a HML or private lender might work, they generally won't for a long term hold strategy. I would need to know an ARV to suggest an offer.  Jim