32-Unit Short Sale Apartment

One of our recent projects has been the negotiation of a 32-unit short sale multi-family aparment complex. Each deal we negotiate is unique but this one has been really interesting.

A few observations:

-The property did go to auction and the bank bought it back. This wiped away the 300K in construction liens on title.

-The bank is a small regional bank and got in way over it's head on the loan to the investor. The complex is only two years old and is 66% occupied at the moment. 

-All banks we've been talking to regarding financing will only loan based on 85% occupancy, 30% downpayment, and  a debt to income (DSCR) of 1.3 or more.

-It's been clear that the bank has no idea about commercial real estate valuation and is trying to sell the property based on inflated information. We buy only on acutal numbers, never on future performance!

-The bank was initially asking for 1.5 million and came down to 1.2 million. Our offer has remained firm at 750k because this a value in which we safely cover our expenses and debt service.

-Then bank is very motivated to sell because they must hold reserves against this property on their books. Banks are not in the business of owning real estate. They are in the business of lending money!

-The trick will be to find a way to do this deal with 100% financing and no money out of pocket. We believe that the bank is in a position where they must consider this.

Like a friend of mine said this weekend past, don't focus on just one deal, there are so many out there that if you are making offers on 10 properties at a time, one will eventually go your way.

We will keep you posted on the progress with this deal. 

Geoffrey & Gabe

OC Short Sale Guys

(949) 287-4483