All Forum Posts by: Nick B.

Is that Grant Cardone by any chance?

It depends on your goals. 

If 10 units is the biggest property you would ever buy, it is probably not worth the hassle. 

But if this 10 units deal is just a stepping stone to a 1000 units portfolio, then, by all means, jump out of the bed and do it!

There is no correlation between MTM and cap rates. 

Besides, MTM is not set in stone and you as a new owner may change it to regular long term lease. 

If you walk away, what kind of earnest money would you lose?

If you buy it, how would you use it? E.g., live in one side, rent another; rent both sides; resell quickly for a profit; etc. Would this make sense financially?

Each option has its own pros and cons and you are the only one person who can make that decision. 

Do you have any money tied to that contract? Any penalties if you walk away?

If yes, can you sell the contract (assign it) to a buyer who is willing to pay $400K? E.g. if your price is $380K, you assign this contract to another buyer for $5K fee and they end up paying $385K instead of $400K. Win-win for both of you.

GP going bankrupt does not necessarily reduce your equity to zero. In a typical structure a property is owned by a holding company that in turn is owned by LP and GP investors. GP is a separate entity that manages the holding company. If GP goes bankrupt, investors should be able to oust it and elect a new GP. This is should be in the company agreement. If not, you don't want to participate. 

CapEx growth is a function of inflation of construction materials and labor cost. It has nothing to do with rents.

Your math looks correct but whether or not your seller likes it remains to be seen 

1. Calculating payments: PMT = NOI/12 - $1200 (expected cashflow). E.g., If your NOI is $60K, then the payment is $60,000/12 - $1200 = $3800

2. Same as #1 but for different NOI. Why though? Keep it simple - go for the fixed payments regardless of NOI.

3. Depends on the seller. At 0% interest, I would look for a fully amortized loan over 26 years ($3800/mo) :-)

4. Depends on your investor's demands. Maybe 10% simple interest or 80% of profits or anything else.

5. Use typical closing costs for a cash transaction: title insurance, recording fees, inspection, whatever else is customary in that city/state.

6. If the seller is OK with the price and terms and that benefits you as well, it's a win-win

Cap rate only makes sense at the time of sale. It is used to estimate terminal value of a property.