10 unit - Easy no money down deal?

Question

10 unit building in a decent part of town. Gross annual rents are $52,000 (tenants pay utilities). Asking price is $170,000. No, that isn't a typo. Cap rate is 31%.

I doubt this one will last long on the market. I don't have enough capital to put 10% down, but I am thinking of offering $180,000 if the seller will carry back a 2nd mortgage at $18,000. I have seen multiple places online offering 90% LTV commercial financing with subordinate financing OK.

10% seller @ 7%
90% mortgage @ 7%
Estimated monthly payments of $1200 P+I.
Expenses estimated at 40% gross = $1720
Gross monthly rents = $4300

4300 - 1200 - 1720 = $1380/mo. = $138/unit/mo. cashflow

Am I crazy or does this sound completely doable? Would I be crazy not to put in an offer sight unseen ASAP?

Craig L. · Answer

Under contract.

Not by me.  :cry:   A few days late, apparently.

Craig L. · Answer

Ah, yes, I forgot to mention that the rents are below market. They are at around $425/mo each, and should be at least $525 possibly even higher.

Will report back once the realtor gets back to me. I'm hounding his voice mail.

Rod Coleman · Answer

hey guys i got a question for u. how do u put a property under contract if u found the property thru an agent.

MATT WARDEN · Answer

I am also a member of FlyerTalk forums. There are even more random acronyms there. They have an FAQ which defines all of these acronyms. I'm surprised that this site doesnt (seem to) have one.

As a newbie here, there are many acronyms I do not recognize.

Richard Warren · Answer

Under Real Estate Tools on the left side of this page you will find Real Estate Abbreviations.

8)

Dave Kennedy · Answer

Oh ok...simple enough. Thanks for the clarification.

So if you were to take on that loan, could you take an addtional loan for the remaining 20%? Piggyback it? Thus, keeping you from having to put down any down payment.

Richard Warren · Answer

LTV = Loan To Value

If a bank will loan at 80% LTV and the building is worth 100k they will loan 80% of that or 80k.

8)

Richard Warren · Answer

You can, however some banks will not allow it and others will.  There are several knowledgeable mortgage brokers on this site who could give you better information.

8)

Dave Kennedy · Answer

Sorry for asking this, but I'd like to know what LTV stands for and what does it mean.

New here...so you'll have to deal with my ridiculous questions until I come up to speed with the regulars.

Thanks.

Ryan Webber · Answer

Compared to 95% of the country, I live in a very strong market to cash flow on properties, and in my area if that property needed no MAJOR repairs (no more than 10-15K to get all the units rented and decent looking), I could have easily sold it for $200,000 within 30-45 days of putting it under contract, probably even $210,000.

If your market is even just not completely in the toilet right now, that could have been $30,000 to $40,000 in your pocket.

And that folks is how you make money wholesaling.