All Forum Posts by: Shannon Cannon

I could use some help evaluating a deal please. Short version--I've done some flips, but wanted to get into buy and hold. Ran into a man willing to sell his 8 plex that flooded last year in Baton Rouge. A little nervous about the big jump from looking for a couple properties, to purchasing a 9 plex, but think it has a lot of potential. Appreciate your input!! 

8 units, 1000 sq ft each (completely gutted to ceiling. electrical, plumbing, hvac intact, but ac units need replaced)

He wanted 45$ sqft, will take 40$ sq ft or $320,000 (we wanted 35$ sq ft. -280,000 but felt ok to do $300,000) Feel like $320,000 will be ok, will just have less wiggle room with renovations. Need to keep loan under $500,000, so leaves $180,000 for renovations. 

Local banker said they usually do 5/15 but can do 20 year, assuming that would be 5/20. About 5ish %, so we did 5.5 interest rate on high end to run the numbers. We're thinking we could do renovations for $150-200,000. Banker said they might can do the loan based on the ARV, so depending on what that might be, we might not have to put very much cash down. Would try very hard to keep the total at or below $500,000. So based on that number, this is what I've come up with so far...

$3440 note at 5/20 5.5% $500,000

Insurance (agent gave quote with foremost) $6000 annually

flood insurance waiting on quote but thinking $2000 high end annually?

Property taxes $5000 annually apx

Maintenance--$1000? annually apx (thinking we won't need much repairs on new renovations?)

TOTAL expenses==$55,280

He said he rented his for $850 before the flood. I'm thinking $800 might be a good guaranteed number, but could potentially get up to $900 for newly renovated. So going to do the math for both 800 and 850.

Income @ $800==$76,800- 2% vacancy (is that an accurate %?)==$75,264

Income @ $850==$81,600-2% vacancy==$79,968

So @ $800 cash flow would be $19,984 annually and @ $850 would be $24,688

I know that looks good on paper, but I feel like I must be missing something. We will be subbing out the renovations, and I haven't done a complete breakdown yet, but did a rough estimate.

I have no idea of appraised value. The only multifamilies for sale at the moment are closer to LSU, and I'm assuming the prices are higher there. But a 4 plex, good condition, looks like it might run about 500,000 near LSU. The area of this 8 plex is a very decent area, I'd say B+, maybe B-. If I had to guess an appraised value completely renovated, I'd say 700,000 easily maybe? Average price of property is 100$ a sq ft pretty regular around here. Rental rates are 1$ sq ft most places, esp SF homes.

Sorry you've spent your evening reading my novel!! I just wanted to include as much info as possible so you can help me see what I may be missing and if this seems like a good investment deal!! Thanks again!!

Continued from previous post...

8 units, 1000 sq ft each (completely gutted to ceiling.  electrical, plumbing, hvac intact, but ac units need replaced)

He wanted 45$ sqft, will take 40$ sq ft or $320,000 (we wanted 35$ sq ft. -280,000 but felt ok to do $300,000)

Local banker said they usually do 5/15 but can do 20 year, assuming that would be 5/20. About 5ish %, so we did 5.5 on high end to run the numbers. We're thinking we could do renovations for $150-200,000. Banker said they might can do the loan based on the ARV, so depending on what that might be, we might not have to put very much cash down. Would try very hard to keep the total at or below $500,000. So based on that number, this is what I've come up with so far...

$3440 note at 5/20 5.5%  $500,000

Insurance (agent gave quote with foremost)  $6000 annually

flood insurance waiting on quote but thinking $2000 high end annually?

Property taxes $5000 annually apx

Maintenance--$1000? annually apx (thinking we won't need much repairs on new renovations?)

TOTAL expenses==$55,280

He said he rented his for $850 before the flood.  I'm thinking $800 might be a good guaranteed number, but could potentially get up to $900 for newly renovated.  So going to do the math for both 800 and 850. 

Income @ $800==$76,800- 2% vacancy (is that an accurate %?)==$75,264

Income @ $850==$81,600-2% vacancy==$79,968

So @ $800 cash flow would be $19,984 annually and @ $850 would be $24,688

I know that looks good on paper, but I feel like I must be missing something.  We will be subbing out the renovations, and I haven't done a complete breakdown yet, but did a rough estimate.  

I have no idea of appraised value.  The only multifamilies for sale at the moment are closer to LSU, and I'm assuming the prices are higher there.  But a 4 plex, good condition, looks like it might run about 500,000 near LSU.  The area of this 8 plex is a very decent area, I'd say B+, maybe B-.  If I had to guess an appraised value completely renovated, I'd say 700,000 easily maybe? Average price of property is 100$ a sq ft pretty regular around here.  Rental rates are 1$ sq ft most places, esp SF homes.

Sorry you've spent your evening reading my novel!!  I just wanted to include as much info as possible so you can help me see what I may be missing and if this seems like a good investment deal!! Thanks again!!

Shannon

Thanks everyone for your responses!! So we've been negotiating back and forth with the seller, and because his price is on the higher end of what we wanted to spend, I need some advice.  I know a good bit about single family residence and flipping, but this will be our first rental and multifamily investment-also first commercial loan--so I am feeling a bit apprehensive.  I think the numbers work, and I will lay it out for you all in a minute, so you can give me some wisdom, but let me tell you the crazy story behind this!!

So we live in the Baton Rouge area, that flooded one year ago.  I've been driving by these apartments that flooded waiting to see if they would be renovated.  So a couple a months ago, I decided to start trying to find the owner's name to see if he'd be interested in selling.  I found a couple phone numbers, but they didn't lead to anything.  So yesterday, I was at our city permit office waiting on a permit for another house we just purchased.  I decided while I was there, I would go to the courthouse and try to find out who owned the apartments.  I was literally typing in the address of the apartments to do a search, when I heard someone saying the address out loud!! I thought, surely I must have heard him wrong! As I listened to him continue to talk, he was talking about his apartments that he needed a permit to begin renovations!! I couldn't believe it!! I went up to him and said, "You're not going to believe this, but I have your address written down right here to go find out who you are!!!" I asked him if he was interested in selling, and he said jokingly, "got your checkbook!" He's an older gentleman who built them originally and doesn't need to sell.  I think he probably would rather not renovate, since it looks like he will do the work himself, most likely.  But he's not looking to give them away either.  Long story little shorter, we met yesterday afternoon to look at property. Ive spent most of my night last night and day today on phone with bankers, insurance agents, contractors-trying to get a good idea on price.  Can't help but feel like this was divine intervention, and don't want to pass up an opportunity from the hand of God because of my apprehension!!! So I will show you what I've come up with so far.  Any advice is most welcome!! Thank you so much!!!

Will have to post separately, cause I've run out of room with my long short story! Sorry!

Thanks Robert!! I will reach out to them!!

Yes, I would probably figure the high end estimate, but that helps a lot, thank you!

I'm trying to crunch some numbers for purchase of an 8 plex. Can someone give me an apx price for insurance? I know this varies greatly, just trying to get an idea. Thanks so much!!

Shannon

Thank you all so much for the quick info! Getting ready to go meet with the seller, so I appreciate your feedback. I talked to a local banker, and sounds similar to what you guys said. Will update you if things work out. Prayers welcome, thank you!! 😊

Hello!! We are going to meet with someone today about purchasing his 8 plex. It was a sudden thing, and I haven't had a lot of time to do my research. This will be our first multifamily purchase, and I'm not certain how to go about financing or how to determine a reasonable asking price. Is a commercial loan the way to go in this circumstance? Any advice would be much appreciated! Thank you!

Shannon

I do have the down payment money. I've called a couple small banks we've worked with in the past, and one is capped out on the amount of investment loans they give, and the other doesn't do rental loans, but will call around some more tomorrow. Any that you could recommend? We have been considering building a small multifamily, so just thinking this might be an opportunity to keep our debt to income ratio down doing the subject to, but might not be the best option available. Thanks so much for the input! Value yalls experience and advice.

Thank you! Will call them tomorrow!