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Started By
Message
Thinking of buying an apartment complex
Posted on 5/25/24 at 8:32 pm
Posted on 5/25/24 at 8:32 pm
Gents,
I have an opportunity to buy an apartment complex with 58 units, split between 2,3&4 berms. Average price per unit is 46,5k, or 2.7mm. I’m a small SFH rental investor with 10 doors currently so this would be a steep step change, in addition to the largest financing venture I’ve taken to date. The market that the unit is in is favorable and current tenants are paying approx. 30-40% below fair market rental. NOI is 460k and occupancy is 90%.
Anyways, I’m looking for advice on financing. Seller financing is out of the question so it will likely be a commercial loan unless someone has a lead of something I may be missing out on. I’m assuming I’ll be limited to 20% dp unless I can come up with some creative financing options.
I have an opportunity to buy an apartment complex with 58 units, split between 2,3&4 berms. Average price per unit is 46,5k, or 2.7mm. I’m a small SFH rental investor with 10 doors currently so this would be a steep step change, in addition to the largest financing venture I’ve taken to date. The market that the unit is in is favorable and current tenants are paying approx. 30-40% below fair market rental. NOI is 460k and occupancy is 90%.
Anyways, I’m looking for advice on financing. Seller financing is out of the question so it will likely be a commercial loan unless someone has a lead of something I may be missing out on. I’m assuming I’ll be limited to 20% dp unless I can come up with some creative financing options.
10
Posted on 5/25/24 at 8:38 pm to TunaTrip
commercial multi-family broker here in new orleans.
In today's market and conventional financing, you should plan on 30%-35% down. There are a number of excellent MF lenders out there.
In today's market and conventional financing, you should plan on 30%-35% down. There are a number of excellent MF lenders out there.
This post was edited on 5/25/24 at 8:40 pm
Posted on 5/25/24 at 8:54 pm to hey benji
quote:
should plan on 30%-35% down.
20% will be a stretch liquidity-wise. I could shed 100 cash but not much more. Are most investors that you see coming up with cash holdings, or borrowing against assets to come up with the 30-35% down? I could do it if I’m pulling equity out of land and rentals. Only other options which would be a risk, is ROBS from retirement savings.
Posted on 5/25/24 at 9:23 pm to TunaTrip
Are you sure your numbers are correct?
A 17 cap rate with room to go higher?
If the numbers you are saying are accurate it’s the deal of the century.
I feel like you are leaving information out or missing something here.
Deals like this don’t exist.
A 17 cap rate with room to go higher?
If the numbers you are saying are accurate it’s the deal of the century.
I feel like you are leaving information out or missing something here.
Deals like this don’t exist.
Posted on 5/25/24 at 9:31 pm to TunaTrip
quote:Why isn't it full if it's so far below market?
occupancy is 90%.
Posted on 5/25/24 at 9:35 pm to I Love Bama
The numbers are what I got from the broker, but have not received disclosures yet - I’m expecting them Tuesday.
Posted on 5/25/24 at 9:36 pm to Big Scrub TX
quote:
Why isn't it full if it's so far below market?
Not sure, running market research now.
Posted on 5/26/24 at 6:43 am to TunaTrip
I appraised multi-family for 6 years when I was younger. Happy to look over it if you wish.
Just be sure you are analyzing audited P&Ls and not valuing this thing based on some made up pro forma that brokers are famous for doing.
Like I said, deals like this really don't exist. If something hits the market, it normally fetches the market rate.
Just be sure you are analyzing audited P&Ls and not valuing this thing based on some made up pro forma that brokers are famous for doing.
Like I said, deals like this really don't exist. If something hits the market, it normally fetches the market rate.
This post was edited on 5/26/24 at 6:44 am
Posted on 5/26/24 at 6:46 am to TunaTrip
You can't afford it. Also, not worth the risk if you don't have experience with that many units
Posted on 5/26/24 at 7:17 am to TunaTrip
I am commercial banker who finances all property types.
20% down is the minimum on this type of deal
Usually 5 year term and 20 year amort, but a property that size you can do Fannie Mae small balance program that can do 30 year amort.
Things to check for insurance and taxes. If the insurance is not current it is probably going to be double right now. Just a terrible insurance market.
I like multi family and tends to be great asset especially with rates high for single family.
20% down is the minimum on this type of deal
Usually 5 year term and 20 year amort, but a property that size you can do Fannie Mae small balance program that can do 30 year amort.
Things to check for insurance and taxes. If the insurance is not current it is probably going to be double right now. Just a terrible insurance market.
I like multi family and tends to be great asset especially with rates high for single family.
Posted on 5/26/24 at 9:03 am to I Love Bama
quote:
Are you sure your numbers are correct?
A 17 cap rate with room to go higher?
If the numbers you are saying are accurate it’s the deal of the century.
I feel like you are leaving information out or missing something here.
Deals like this don’t exist.
Exactly this. Most transactions in today's market are happening in the 8.5-9.5 cap range.
If you are looking at something that is 90% occupied and a 17 cap, something is seriously up with the numbers.
Request an audited T12 and rent roll. Confirm your taxes now and after purchase and plan on insurance running about 1200-1500 per door to be safe and plan on putting down 30%-35%.
This post was edited on 5/26/24 at 9:04 am
Posted on 5/26/24 at 9:07 am to TheOcean
quote:
You can't afford it.
This is looking more like the case if pulling equity out for the 30% is not a good idea.
Posted on 5/26/24 at 11:12 am to TunaTrip
If the numbers are correct, it is not just a good idea, its a GREAT idea.
Posted on 5/26/24 at 11:25 am to TunaTrip
If numbers are accurate, let me know if interested in a partner.
Posted on 5/26/24 at 12:12 pm to hey benji
quote:
Most transactions in today's market are happening in the 8.5-9.5 cap range.
Which markets and which product? This isn't in line with what I'm seeing AT ALL. Anything halfway decent trades south of 7...and most things seemingly still trading 6 or lower. $46K/door...this sounds like run down workforce housing in a C market to me.
Seems highly unlikely the buyer won't have to do a major rehab to raise rents and fill it the rest of the way.
Posted on 5/26/24 at 1:28 pm to TunaTrip
One aspect of this is that taking on that many units along with your current portfolio might mean you would need to move from contracting handyman services as-needed to hiring your own f/t employee. A very general rule of thumb is one handyman for 70 units, especially if the units are older. Your current 10 units plus the 58-unit complex would put you right in that grey area.
That then causes other costs like workman's comp, social security, a work vehicle and/or gas stipend.
That then causes other costs like workman's comp, social security, a work vehicle and/or gas stipend.
This post was edited on 5/26/24 at 1:30 pm
Posted on 5/26/24 at 2:31 pm to BawtHouse
quote:
If numbers are accurate, let me know if interested in a partner.
Me too
The money board becomes slumlords
Posted on 5/26/24 at 4:29 pm to TunaTrip
quote:
TunaTrip
If you’re looking at buying apartment complexes I may have something that interests you. Not as big as the property you described but manageable for someone with MF experience.
20 units in Walker that I’m looking to sell. Early stages of the process- I’ve gotten an appraisal but have not talked to Realtors.
slinger1317 at gmail if you have any questions
Posted on 5/26/24 at 11:17 pm to slinger1317
I sent you a message
Posted on 5/27/24 at 7:47 am to TunaTrip
Numbers are suspect to me.
Is it currently listed for sale ?
If so, how many days has it been on the market?
Is it currently listed for sale ?
If so, how many days has it been on the market?
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