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Question

I have found 5 multi family properties in the same complex, if I were to bundle the units and purchase them at asking price(not likely to happen) it would cost $450,000. The net profit yearly would be in the 110-130K range. Closer to 130 bases on the local property value. After running the numbers I would profit about 1600 a month while paying off a 15% interest loan and upkeep. Am I missing something? And what are my options for going about funding this deal?

Charles Soper · Answer

This seems really unclear, when you say 5 MF properties in one complex what does that mean?  5 condo units in the same complex all individually for sale?  5 duplexes all on the same street/subdivision?

Assuming 5 condos in the same complex, you would likely need to purchase them individually unless they are all the same owner and find a local community bank that would be willing to do a portfolio loan on the group after the fact.

A 15% (!!) interest loan is insane!  Even most hard money guys don't charge that (12 is pretty standard), what's the reason for such a high interest rate?  You're rents better be right in line with the area because if you have multiple vacancies at once that could be a real strain on your cash flow and ability to pay the mortgage(s).

You need to provide more information if you need further help.

Joel Thompson · Answer

@Charles Soper you stole the words from me! Local REIA, BP, Meet-Up, etc. events are a great place to meet local HMLs. I always recommend working with someone in the area you're going to be investing because they can provide a valuable second set of eyes to help you evaluate a deal you're looking at.

@Dae’Leon Flucas I work with investors in Washington & Oregon so I'd be happy to help if that's where you're considering investing. If not, I can help you connect with someone, or if you go to Network > Companies on the Menu bar at the top of the page you can find lots of HMLs there.

Joel Thompson · Answer

@Dae’Leon Flucas good call running the numbers per worst case scenario.

I have a book by Frank Gallinelli titled "What every real estate investor needs to know about cash flow" and it has proved to be very valuable when assessing potential properties. I'd definitely recommend giving it a read through.

Charles Soper · Answer

Still do, it’s turned into more of a friendship than a business relationship at this point though.  You’ll find real estate is a team sport as you spend time around like minded individuals.

Charles Soper · Answer

I find one of the best ways to find HML’s and community bankers is through your local REIA or meetups.  My 1st HML I met through a local REIA and he funded 100% of my purchase price (I had to bring the rehab and closing costs)!  Community banks are happy to talk with you, you are a potential customer, don’t look at it as wasting anybody’s time.  Be up front about your experience and if they’re any good at sales they’ll spend time with you and develop the relationship.

It sounds like @Joel Thompson is willing to spend a few minutes on the phone with you.

Joel Thompson · Answer

@Dae’Leon Flucas I am a lender and get inquiries from people on the regular. @Charles Soper is right, you want to have a plan in place so that when the right deal comes up you can move quickly.

I can't speak for all lenders, but I'd personally be glad speak with with someone that's using hard money for the first time prior to analyzing a deal with them. It will help the borrower understand the cost and specific usage for hard money, as well as the process.

Charles Soper · Answer

I would highly recommend starting to get the relationships in place with potential HML's and community banks NOW so that when you have a deal you have got the preliminary items they require out of the way and you have a better idea of what you can expect/afford in terms of a loan, down payment, expenses, etc.

Might suggest you look into using the BP calculators to make sure you're catching all your expenses, or at least are aware they are possibilities.

Joel Thompson · Answer

@Jo-Ann Lapin I agree, fortunately @Dae’Leon Flucas was just over estimating the interest rate so he would not come in over budget on that component he wasn't familiar with.

Jo-Ann Lapin · Answer

15 percent et is just crazy . What we don’t know is the over all maintenance of the subject roof, electric , plumbing and potential for rents to increase and well as renter profile .

Dae’Leon Flucas · Answer

@Joel Thompson I’m looking all over the country at the moment. I would like to find commercial properties outside of California, so I am very much interested.

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