Offer advice on a 9 unit bldg

[Shawn Blount]

I have the opportunity to purchase a small apartment complex. Current ask is $275K.

Total income for the complex is stated at $34,905, total expenses are stated at $17,388.40. I have only been given a basic breakdown of expenses-taxes, insurance, utilities and maintenance.

For my area, the rents are only somewhat low. The units are very basic but, from a cursory glance, appear to be in good shape with the recent improvements.

Rents could be increased, but that would be my responsibility. Market rent would probably be only 12 percent higher based on surrounding properties.

My lenders are offering a 5/20 at 4.25% or 10/15 at 4.75% with 25% down.

Any suggestions on an offer? Or advice on which loan makes the most sense, balancing cash flow with the direction interest rates are headed?

Thanks in advance

[Joel Owens]

Problem is the number of units and the loan is small for commercial. That is why the term and amort. isn't great.

It's just like a commercial broker in that I don't want to transact an 8 unit building for 200k when I am selling buildings for 2 to 3 million at a time.

Usually when a building hit 1 million of more in sales price then it becomes good for the time invested. At 1 million or more in loan price many more multifamily lenders open up and you have much more options for financing. This is why lenders like certain loan thresholds to get involved otherwise the payout it too low.

If you are paying utility go 55% to 60% costs. If the building is a really old vintage (year built) go 60% for sure.