Making Multifamily Money - Nov 21st 2024

Real Estate Updates

Analyzing the numbers on the 14 unit apartment complex (there will be lots of math so please be aware!).

Seller wants 47k per door (seller fixated on this number for some reason) which comes out to 658k.

I talked to 2 local community community banks to see what there thoughts were. This is what I found out!

The gross rental income was 100k. The “stated” gross expenses was 15k which doesn’t include insurance and property tax. The lender assumes 40% as gross expenses leaving a net operating income of 60k.

These are the loan terms:

Down payment : 20% (can use equity from another deal under same bank as cross collateral)

Amortization: 20 years (national lenders usually 25-30 years)

Interest rate: Prime + 0.5% = 8.5%

Term: 3-5 years (national lenders usually 7-10 years)

DSCR = NOI/Debt Payment > 1.25

Let’s work backwards to come up with an offer based on DSCR > 1.25.

DSCR = NOI / Annual debt payment so 1.25 = $60,000/ debt payment then annual debt payment = $48,000 or $4,000/month

Now pull up a mortgage rate calculator to find out what loan amount gives you a monthly loan payment of $4,000 based on the terms above. That comes out to be loan amount of $460,000 which is a final offer of $575,000 which is about 83k less than what the seller wants.

At most my offer would be 575k for this deal and based on Propstream looks like the seller bought it for 525k back in 2020. Answer will probably be no.

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