Credit issue

[inveztr]

Hello
Im new to this forum and I thank you all for your time. I have a question about Credit. My credit is not horrible but Im not in the 700 range. (Low 500's). I want to know if its possible to get a co-signer or form a partnership on my first project? Im talking about multi-family here not SFR.
I found a property in a supposedly hot market and the owner is willing to carry a portion of the transaction. Terms: (Asking 3MM - assume existing 1.5MM owner carry $870,000 approx.). Leaves Approx $600,000 from buyer.
Well if we get a new 80% loan @ 2.4MM have the owner carry the balance of 600K.
Anyway just a approx. example of how Id like to put a deal together but I dont have the credit to get the loan. I know people put partnerships together all the time - can this be done legally and ethically? I understand it can't be a co-signer because then they would check my credit and it would ruin the deal. Help. Thanks.

[Jim Johnson]

To know if this is a good partnership you need to supply more data. How many units, what do they rent for, vacancy, expenses, management fees, deferred maintenance, projected life of building etc. If the numbers make sense, partnerships are easy! Show us the BEEF! So to speak... trying not to insult the chicken farmers here...

Hello
Im new to this forum and I thank you all for your time. I have a question about Credit. My credit is not horrible but Im not in the 700 range. (Low 500's). I want to know if its possible to get a co-signer or form a partnership on my first project? Im talking about multi-family here not SFR.
I found a property in a supposedly hot market and the owner is willing to carry a portion of the transaction. Terms: (Asking 3MM - assume existing 1.5MM owner carry $870,000 approx.). Leaves Approx $600,000 from buyer.
Well if we get a new 80% loan @ 2.4MM have the owner carry the balance of 600K.
Anyway just a approx. example of how Id like to put a deal together but I dont have the credit to get the loan. I know people put partnerships together all the time - can this be done legally and ethically? I understand it can't be a co-signer because then they would check my credit and it would ruin the deal. Help. Thanks.

[Jeffery (LCLA)]

"show us the BEEF! So to speak... trying not to insult the chicken farmers here..."
Ehemm, what about the gator farmers?? Trying to insult us?


My first concern with this is your use of the word "Supposedly" hot market. If I were throwing 3MM into a project, I'd want to know for sure if it was hot or not.
Another thing, with a comercial mortgage, the whole project would be looked at, not just your score. If there's money to be made, there's money to be had.

Now, if you really want some good info, put some details here, like Jim suggested. List all the info that you have available to you (no need to list addy or contacts) and the area that the property is located in and I'm sure some more experienced folks will likely chime in.

Jim, I'm still insulted, perhaps I need to introduce the "other red meat" to my gators.:smiley10:

[inveztr]

Hello all...

I would offer 20 to 40 % less than asking price.
Some steak...

PROPERTY DESCRIPTION
Type: 81 unit Apartment Complex
Rentable Building Area: 61,560 (56-2 bdrm, 1 bath and 25-1 bdrm, 1 bath)
Price Per Unit: $37,037
Land Size: 2.34 acres
Zoning: R-3
Parking Spaces: 108
Year Completed: 1972
Number of Buildings: 3
LEASING ST STATUS TUS
Occupancy: 95%
Lease Type: 6 month leases
FINANCIAL DA DATA
Offering Price: $3,000,000
Net Operating Income: $303,394
Capitalization Rate: 10%
Terms: Assume existing debt of $1,529,853 (8.625% interest)
Owner financing available of $870,147
(30 yr. AM, 7.5% interest)


Stabilized
No. of Units Bdrms/Baths Sq. Ft. Avg. Rent/Unit
25 1/1 634 $ 475
56 2/1 816 550
Monthly Gross Potential Rent by Unit type
25 1/1 634 $ 11,875
56 2/1 816 30,800
Annual Scheduled Gross Income $ 512,100
Vacancy Allowance (5%) (25,605)
Other Income 24,000
Gross Operating Income $ 510,495
ESTIMATED ANNUAL OPERATING EXPENSES
Fixed Expense
Property Taxes $ 45,942
Insurance 7,552
Total Fixed Expenses $ 53,494
ESTIMATED ANNUAL VARIABLE EXPENSES
Sewer and Water $ 20,562
Trash 4,953
Natural Gas 679
Other Utilities 7,239
Landscape Maintenance 1,215
Maintenance and Repair 23,000
Pool Maintenance 1,745
Telephone 1,209
Office Supplies 1,871
Painting and Decorating 5,300
Cleaning 7,000
Electric 10,344
Advertising 2,354
Manager Salaries 34,800
Management Fee (5%) 25,525
Legal 3,088
Miscellaneous 2,723
Total Variable Expenses $ 153,607
TOTAL ANNUAL EXPENSES $ 207,101
Total Expenses/Unit 2,556
NET OPERATING INCOME $ 303,394
Debt Service (assume existing loan balance $1,529,853, 8.625% interest) $ 175,752
2nd Deed of Trust or Note $870,147 (30 yr. AM, 7.5% interest) $ 72,556
Total Debt Service $ 248,308
Pretax Cash Flow $ 55,086 9%
Plus Principal Reduction $ 56,864
Total Return Before Taxes $ 111,950 18%

[inveztr]

helllllloooooooooo.... :beer:

[Aldo]

Before giving the least possible hint to my thinking, I need to know what kind of landlording/investing experience will appear on your resume. I, and others here, can guide you through the roughest of seas if we know what kind of boat you are trying to float.
Ouch! Okay! I give up! I'll give you a hint. If, perchance, this is your first investment consideration, you will be in some mighty deep doo-doo and you'd probably have to climb a ladder to look down. I may be off-base but, the way I read your post, I'm thinking that you don't have a lot of RE investment experience. A lot of units is great. A lot of tenants is not, unless you know how to deal with them.
While I intend no disrespect and do not wish to discourage you, I do want to let you know that you must know what you are doing before you do something. There's a whole lot more to RE investing than just acquiring a rental property.

[Jim Johnson]

When are the existing note and the new 'owner' note due? How old is the old note, and is there a balloon on the new one. Are there pre-payment penalties on either?


Hello all...

I would offer 20 to 40 % less than asking price.
Some steak...

PROPERTY DESCRIPTION
Type: 81 unit Apartment Complex
Rentable Building Area: 61,560 (56-2 bdrm, 1 bath and 25-1 bdrm, 1 bath)
Price Per Unit: $37,037
Land Size: 2.34 acres
Zoning: R-3
Parking Spaces: 108
Year Completed: 1972
Number of Buildings: 3
LEASING ST STATUS TUS
Occupancy: 95%
Lease Type: 6 month leases
FINANCIAL DA DATA
Offering Price: $3,000,000
Net Operating Income: $303,394
Capitalization Rate: 10%
Terms: Assume existing debt of $1,529,853 (8.625% interest)
Owner financing available of $870,147
(30 yr. AM, 7.5% interest)


Stabilized
No. of Units Bdrms/Baths Sq. Ft. Avg. Rent/Unit
25 1/1 634 $ 475
56 2/1 816 550
Monthly Gross Potential Rent by Unit type
25 1/1 634 $ 11,875
56 2/1 816 30,800
Annual Scheduled Gross Income $ 512,100
Vacancy Allowance (5%) (25,605)
Other Income 24,000
Gross Operating Income $ 510,495
ESTIMATED ANNUAL OPERATING EXPENSES
Fixed Expense
Property Taxes $ 45,942
Insurance 7,552
Total Fixed Expenses $ 53,494
ESTIMATED ANNUAL VARIABLE EXPENSES
Sewer and Water $ 20,562
Trash 4,953
Natural Gas 679
Other Utilities 7,239
Landscape Maintenance 1,215
Maintenance and Repair 23,000
Pool Maintenance 1,745
Telephone 1,209
Office Supplies 1,871
Painting and Decorating 5,300
Cleaning 7,000
Electric 10,344
Advertising 2,354
Manager Salaries 34,800
Management Fee (5%) 25,525
Legal 3,088
Miscellaneous 2,723
Total Variable Expenses $ 153,607
TOTAL ANNUAL EXPENSES $ 207,101
Total Expenses/Unit 2,556
NET OPERATING INCOME $ 303,394
Debt Service (assume existing loan balance $1,529,853, 8.625% interest) $ 175,752
2nd Deed of Trust or Note $870,147 (30 yr. AM, 7.5% interest) $ 72,556
Total Debt Service $ 248,308
Pretax Cash Flow $ 55,086 9%
Plus Principal Reduction $ 56,864
Total Return Before Taxes $ 111,950 18%

[Jim Johnson]

My question on this deal is where is the upside. I am not saying that every deal needs upside but that is not a great return, cash on cash, for putting down over 1/2 million dollars. If you have that much money to put into a deal, you probably are used to having at least 20,000 in disposable income every month. If the property was bought as part of a large investors holding (reet or sorts) it would make more sense. A 10 year hold that had some sort of upside in rents, occupancy or something. This to me looks like a 'bond' hold. Set long term return, little downside, little upside. conservative, and that is ok, if that is your investing M.O.


[QUOTE=txrigdiver]Aldo, I don't have any experience with commercial deals like this but when I look at the numbers I'm thinking that's not bad cash flow at all. It may not be enough to retire on but $50K can provide a modest living for an entire family for a year. Also, since I do have rentals and I know you do too, I understand your concern about the "baby sitting" issues with so many tenants. Looking at the numbers in the post though, there's $34,800 for a managers fee, I assume that's a live on site manager the tenants have access to, additionally there is another +$25K in management fees. If I was paying +$60K a year in management only fees I'd pretty much expect to receive a monthly financial statement and a check in the mail every month. I know it's not that simple, I would probably get all the funds on a monthly basis and then have to go through and make a bunch of deposits and write a whole bunch of checks for a couple days evrey month.

This is something I my self would like to get into and hope to within the next several years. So I need to be prepared when a deal like this comes my way.

Assuming that we check out the manager and the tenants satisfaction with the manager then have an accountant go through all the repair and maintenance receipts and everything checks out well, I'd think we did a pretty good job with the due diligence. Evidently I didn't get your clues though, but I can be pretty dense some times. So, what are "inveztr" and I missing, what else do we need to know, or questions we need answered before we pulled the trigger on a deal like this? Specifics would really be helpful since this is a very real possibility for me too.

I guess, answer this from the point where "inveztr" is saying he's ready to pull the trigger right now under a time constraint. what does he need to know and what questions does he need to ask? Otherwise from a monetary standpoint does the deal look good?[/QU

OTE]