All Forum Posts by: Eric Marofske

@Matt Aquino,

Thanks for clarifying.  As you mentioned, the ability to refi and the uncertain exit strategy are concerns, along with the tenant being an immediate relative. If there are tenant issues, is your friend/partner willing to handle the relationship with his mom with an unbiased opinion? 

In addition, the property is cash flow neutral (negative after capex?) and you have little built in equity, leaving you very sensitive to market risk.  

Again, the deal seems tight and wouldn't fit my risk/return criteria, but good luck should you move forward! 

If I am understanding correctly, you are tying up $140k for a proportionate share of FMV of ~$150k (after selling costs), leaving you $10k in profit if all goes to plan. Are you projecting significant cash flows during the hold, before exit? Overall, the deal seems pretty tight but maybe I misread something.

Re #1, you will definitely want to form a business entity when partnering with someone on the deal. It's going to be very difficult to secure a construction loan for a ground up project with limited experience/net worth. Also, I'm not privy to the price of land in your market, but with $50k you are likely undercapitalized.

Start by contacting the owners to get a sense of whether they are interested in selling, and if so, request the historical financials.  You should have a general idea of the $/door for similar properties in the market when making initial contact, but without detailed financials you can't confidently arrive at an offer price.   

You can always try a free google search too

There isn't much margin for error if you are putting up your "last" $10k (maybe this isn't the case) and only raising enough outside capital to fund the purchase; how will you handle any big ticket items up front, collection issues, etc?  Also, why not just raise the entire down payment?

@Sam LLoyd,

A 5% estimate for combined R&M/CapEx seems quite low. With your 4 buildings, are you holding long term or planning to offload before major repairs (roof, HVAC, etc) are needed?

Welcome to BP and to the Indy market. Good luck!

It is more dependent on the seller than the market; if it makes sense to carry a note based on the seller's financial needs/goals at the time, then the option becomes viable.  

Again, the actual terms of the financing are negotiable. You could start with I/O, or 2-3% and a longer amo period, then meet somewhere in the middle.

Hi David Sweeney , I won't attempt to tackle the many questions contained in your post, but one thing to note is that since the subject property has >4 units, it is considered a commercial (not residential) asset. You will need to secure a commercial mortgage, and you should be considering how the purchase cap rate compares to the market rate to help gauge whether you are getting a deal.