The lenders get more money for the same time doing 1 million dollar deals than 100k etc. It like a residential broker that is a friend of mine that has been doing loans for almost 20 years says " On the residential investor 50,000 loans the deal is so small I will only make about 250 bucks on it" so he only does those deals when nothing else is happening. The small size loans there just isn enough money in them for commercial. You might call your local credit union or local to regional bank for financing offered. Especially if this is a micro market with a suburban to rural area as many lenders will only lend in prime locations with certain demographics for the best rates.
I not an expert by any means but I know most of the experienced people use the 50% rule and then a 10 cap to get a starting point.
6 plex completely rehabbed in 2007 from ground up.note all expenses (taxes, insurance, utilities, maintenance, etc) were taken from sellers ledger. I increased them in my calculations to make sure I was covered.
All thoughts/advice are much appreciated.
I am currently negotiating a deal on 6 plex. I would truly appreciate some opinions on what price range you seasoned veterans would be looking at on this property to make it worth my while from an investment standpoint.
Rehabed 2007 tells me actual not much maintenance needed but in 5 10 years this will raise constantly.
As you can see WATER paid by the landlord is one of my number once concerns when looking at a property. If the capital improvements done in 2007 by the seller were mainly cosmetic than I wouldn count them as much as replacing heater, water heater, roof, plumbing, electrical, water main to the street etc. Even if you count those some of those items are now half way through their life cycle and the odds increase the next few years something might go wrong with them. The sellers always hope they will not come across an experienced investor such as myself and instead hope for someone who knows just enough to overpay to where there drop in purchase price is a little but not a lot.
If you have read some of my posts before if the landlord pays trash that is not as a big of a deal typically but paying water is HUGE. I always go 55% to 60% annual costs of gross income for cap rate for the area with paying water. I have experience and do not listen to the seller saying it isn that bad etc. Since you will be paying water learn if this property is within the city or just the county. Talk to the water department and learn how old the water and sewer system infrastructure is at the street and are they going to be having a special assessment to cover delayed repairs and improvements to a failing system in the near future?? Pay attention to if any water shortages have been reported for the area and water restrictions put in place. If water shortage is common for the area and you the landlord pay for water you do not want to get hit with fines for excessive usage by your tenants. Yes you can try to bill the tenants for water if you set it up that way but in many case you will still get billed and be responsible for the bill.
My quick math would be gross of 35,040, NOI would be 17,520. That assuming tenants pay all utilities. So at a 10 cap it would be worth $175,200. In my area, nothing really sells a a 10% cap rate. Most are 14 16% here in Nike Womens Sweater
You can run your numbers but also the debt service and LTV that can be obtained and whether the senior lender will allow a 10 to 15% second all affect long term cash flow and cash on cash returns. So that part is just as important as the evaluation side of it. I have clients that say look at this great cap or area et. but when it comes down to the financing the numbers do not pencil as good. for example loans might be at 3.65% with a 25 year amort. with a 7 or 10 year term and cap is 4.5 to 5% because it is a rent growth and appreciation only area. In those areas having a Nike Socks Low Cut
I would go with a 20 year commercial financing here you need at least 25% down payment but you pay then $946 per month at 6.5% Nike T Shirts For Mens Sports monthly. Cash flow in this case is too small for me so I would say 40% down is better but this depends on your pockets and/or goals.
Also, what are your thoughts on negotiating the seller to carry a portion of the loan to minimize out of pocket expense as far as a down payment?
go up dramatically. I have seen some areas rise 40% in the last five years before upon research.
seller take back a second doesn pencil in and is asking for an exception on a loan.
Financing either 20 or 30 years.
Check for the area also if water and sewer rates usage per gallon etc. has been going up each year or hasn been raised but is fixing to Nike Sweaters For Ladies
As far as financing, I do know that 6 units will be commercial. I haven heard of any commercial lender that offers a 30 year term. 25 max as far as I know.
It going to be hard to find a loan for that small purchase price on a property with it being a 6 unit for commercial.
6 Plex Advice
So you have to know cold the numbers for a loan you can get in the area you are looking at buying. The sellers numbers from what you are saying they redid everything in 2007 and have showed less than expected costs with schedule E While they may be true it is now 6 years later and if you buy THERE WILL start to be immediate capital costs that will affect your returns. This is why people use the 50% guide over time.
Ma so be sure to check.
I have the operating report for the previous 3 years and the numbers have not deviated much at all from the numbers stated above.
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