Commercial Refinance with an LLC - Am i missing something?

Question

I have access to an off market commercial property with a bunch of moving parts, was hoping I might have some more seasoned investors take a look and make sure I am not missing something.

- Tax Assessment (little to no comps in area) - $1,400,000

- Purchase price 975,000 with 5 year seller financing 0% interest with a 5 year balloon.

- Last years rent roll and expenses are actual and assumed to stay the same for valuation (legal and utilities are a little high, tenants pay electricity only)

- Tenants have been in the facility ranging from 3-15 years, as of right now 1-7 are on a month to month with stated rates, unit 8 would go on the market once purchased. Ultimately would like to lock in longer term leases to reduce turnover

Cant help but feel like i am missing something in my evaluation? Also, is there a vesting period before an LLC can refinance a property or is it strictly based upon LTV? Might it make sense to refinance earlier and pay off the seller financing (owner is on the older side and looking to offload the property) and increase cashflow?

Thanks,Pat

Pat Mcchesney · Answer

Thanks for the note Donald. I've included a Google drive link to a spreadsheet I mocked up.

https://drive.google.com/open?id=1q2GyrQgsONPrCM6W...

As you noted - legal is at 15k, think the original owner may have buried some personal legal costs in there, as a conservative estimate I assumed that this would carry over.

Per discussion with seller they would take seller financing - 100k down, 0% interest and 72k annual for a 5 year term with a 515k Balloon, at this point the refinance would be at 37% LTV (assuming 1.4 Tax assessed holds true) and 53% LTV on purchase price. Cash flow would be a little slim during owner finance period and I'm also unfamiliar with rules behind refinancing through an LLC. My thought is that with a good DSCR and LTV the refinance shouldn't be an issue?

Any input is greatly appreciated as I am having a bit on analysis paralysis.

Thanks,

Pat

Donald S. · Answer

Maybe it's my screen, but your spreadsheet is too small to read even when I pull it out to it's own window and zoom in. You might want to type out some of the more pertinent details for someone to be able to help you out. From what I can see though, why are legal expenses so high, looks like either 15 or 25k?