- Joined
- Feb 7, 2008
- Messages
- 94
Hello, I have spent a few hours on the forum searching to see if this type of question has already been answered but couldn`t find anything.
I know even looking into something like this for someone who is not experienced in RE investing is insane - but I wouldn’t mind getting some questions answered and let`s just say I am trying to learn everything first!
There is a Townhome Complex where 15 of the 20 units are for sale. The units have been for sale for quite some time and the asking price has dropped 35%. The complex is 30-35 years old but the current asking price for each unit seems far below market value (at first glance.) The units are for sale individually or combined. I assume if one were to make an offer for all 15 the price would be even more attractive. The complex is in a top 10 town in BC. Obviously there is a reason these units haven’t sold and looking at a complex that is 30-35 years old there will definitely be immediate renovation costs; however, I assume that this would also be a great way to be able to bring the rents to market value.
So here are my main questions:
• Regarding mortgage options, would it make more sense for an investor to look at each individual unit or the majority of the complex? Through some of the questions and answers on the forum I assume a 15% down payment would be possible on a mortgage for all 15? Or, since they are individual units is a single mortgage even possible?
• Would a lender consider looking at appraising the property by current value plus improvements or is that only possible after the improvements are made? For example, would the down payment be a percentage of purchase price plus improvements or would the improvements have to come from a separate budget? Consider the improvements being 20% of the purchase price.
Basically, here is what I am getting at:
Buy all 15 units @ $90K each for $1,350,000
Invest $20K per unit for $300,000
Total investment $1,650,000
Down payment of $247,500 (15%)
25 year mortgage based on $1,402,500 plus CMHC and all other costs
$1,402,500 mortgage over 25 years at 8% = approx.. $11,000/mo
Average rent of $1400 X 15 units = $21,000/mo
Or
Buy 1 unit at a time for $100,000
Invest $20K for total of $120,000
Down payment of $12,000 (10%)
25 year mortgage based on $108,000 plus CMHC and all other costs
$108,000 mortgage over 25 years at 8% = approx.. $825
Average rent of $1400
Am I making any sense here?? BTW – I started the calculations with $1400/mo X 15units X 12 months = $252,000(annual income) / $1,650,000(total investment) = 15%
Thanks for any thoughts on this!
Nick
I know even looking into something like this for someone who is not experienced in RE investing is insane - but I wouldn’t mind getting some questions answered and let`s just say I am trying to learn everything first!
There is a Townhome Complex where 15 of the 20 units are for sale. The units have been for sale for quite some time and the asking price has dropped 35%. The complex is 30-35 years old but the current asking price for each unit seems far below market value (at first glance.) The units are for sale individually or combined. I assume if one were to make an offer for all 15 the price would be even more attractive. The complex is in a top 10 town in BC. Obviously there is a reason these units haven’t sold and looking at a complex that is 30-35 years old there will definitely be immediate renovation costs; however, I assume that this would also be a great way to be able to bring the rents to market value.
So here are my main questions:
• Regarding mortgage options, would it make more sense for an investor to look at each individual unit or the majority of the complex? Through some of the questions and answers on the forum I assume a 15% down payment would be possible on a mortgage for all 15? Or, since they are individual units is a single mortgage even possible?
• Would a lender consider looking at appraising the property by current value plus improvements or is that only possible after the improvements are made? For example, would the down payment be a percentage of purchase price plus improvements or would the improvements have to come from a separate budget? Consider the improvements being 20% of the purchase price.
Basically, here is what I am getting at:
Buy all 15 units @ $90K each for $1,350,000
Invest $20K per unit for $300,000
Total investment $1,650,000
Down payment of $247,500 (15%)
25 year mortgage based on $1,402,500 plus CMHC and all other costs
$1,402,500 mortgage over 25 years at 8% = approx.. $11,000/mo
Average rent of $1400 X 15 units = $21,000/mo
Or
Buy 1 unit at a time for $100,000
Invest $20K for total of $120,000
Down payment of $12,000 (10%)
25 year mortgage based on $108,000 plus CMHC and all other costs
$108,000 mortgage over 25 years at 8% = approx.. $825
Average rent of $1400
Am I making any sense here?? BTW – I started the calculations with $1400/mo X 15units X 12 months = $252,000(annual income) / $1,650,000(total investment) = 15%
Thanks for any thoughts on this!
Nick
