7-plex deal that I am unsure on- help analyze deal?

1 Reply

We have a lead from a real estate agent of a 7 plex that may be coming out in the near future. It is in a great area close to the University and the current owners are currently remodeling the entire building and currently have no renters in place.  They have owned it for at least 15 years.

Features:

Five: 3bed/1bath, two- 2 bed/1bath & 1 studio= possible rent $8975  (with new remodel)

Purchase price at 1.2M- what our relator thinks we should offer (it is currently off market)

ARV: 1.2 (no add value since it will be newly remodeled)

Monthly expenses using BP worksheet: $7658

Cash flow: $1316/month

NOI $72,141

CoC ROI 5.18%

Purchase cap rate: 6.01%

Some questions we have are:

1. We have only done traditional loans so we don't know how commercial loans work or what terms they usually have. 2. We usually like to buy add value properties so we can add equity into them right off the bat. This has no add value potential but does seem to have good cash return and feels like it would be low cost to maintain since it will be brand new. Not really sure how to think of this and worried that we can't really add equity. 3. How do MF > 5 units usually appreciate? Do they appreciate only on the NOI? Therefore if we go into it without being able to increase rental rates or decrease expenses for years is this not a great idea?
4. Would need 300K for 25% down:  we have great credit, a W-2 job and have $75-100K in cash but would need to find other ways to come up with the rest of the down payment.  We haven't had to do this before so would be interested in how other investors use creative financing when having to come up with this much down.  
retail investment...if that is what you want up to you. In my opinion this deal is nothing to get to excited about.

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here