One of the biggest mistakes made by buyers of investment property is to fall in love with the property and end up paying too much. Here’s an example of an overpriced multi-family which hopefully you will not buy. The apartment building has an annual N.O.I. (Net Operating Income) of $67,000. You have carefully calculated this using the proper formula. The building is 98% occupied and the buyer has a FICO credit score of 712 (a good score). You then divide the $67,000 by .09 (the "9 cap rate"). You use this conservative 9 cap rate for multi-family purchases. This gives you a fair value figure of $744,444, which you round off to a "final target" of $750,000. The final target is the most you will be willing to pay for the property. You decide to start the negotiations by offering 5% below your target which makes your initial offer $712,500.

The seller is represented by a real estate agent who informs you that, “you just don’t understand.” You must be crazy and have forgotten that the asking price is $1,000,000. The seller would be insulted if he, the agent, took such as offer to his seller. The agent is sure the seller won’t take less than $950,000, which you know is still a ridiculous price based on your calculation of net operating income. The agent says that he figures the N.O.I. is $70,000 and a 7 cap rate is generally used in this neighborhood because of the tremendous recent appreciation of residential real estate in the area. That doesn’t matter to you since you always stick to your calculations and you tell him your offer stands.
Since 1975 – Commercial Mortgages & Business Loans
Phone or Text 856-278-6103

After a few small concessions in price, the seller rejects the offer, negotiations break down and fortunately you never buy this overpriced multi-family offered by a non-motivated seller. Why is the seller pricing the property at $1,000,000?. Because he is operating on the "greater fool" theory and is hoping for an inexperienced “greater fool” investor to buy his overpriced building.

Be aware when buying investment property ….. at the closing if you pay $100,000 too much for a property you have LOST $100,000 that day and that loss will be with you as long as you own the property. Conversely, if you buy a property $100,000 under the market from a motivated seller, you have just put $100,000 in your pocket on the day of closing. There is only one loser and one winner in every negotiation. The secret is the winner has convinced the loser that he, the loser, is the winner.

Now...... to demonstrate a point, let’s say that you had disregarded your original calculations, came up in price and finally paid the seller $950,000 for the building. Then you approach Barclay Associates for the commercial loan. You are willing to put down 10% and the seller has agreed to carry back a second mortgage of 10%. We inform you that we estimate a lender will loan you only $600,000 (80% of a $750,000 valuation). Since you are paying $950,000, which is $200,000 more than your target, this simply means that you need to come up with a huge down payment and that you are the loser in the transaction.

This rather long scenario is a classic case of how one can be financially destroyed by falling in love with and paying too much for an investment property. It happens all the time, especially in certain areas of the country where residential real estate prices are currently highly over-inflated.

If you can’t buy a property from a motivated seller at your “final target” price then always pass on the property or I guarantee you will ultimately be very sorry. The old saying goes “another train will always be coming into the station. There is always another multi-family coming on the market. Riches in real estate investment requires a lot of patience. Always remember, anyone can buy commercial property. Unfortunately, too few buy from motivated sellers at the necessary below-market low price.

By Joseph Spatola III
President Barclay Associates

Looking for commercial real
estate investor leads
at an unbelievable low price?
[62,000 Database Names]

How to Contact Us:
Or phone or text us:
Fax: 844-328-4827
Send us an E-mail with some details of your financing request. It is important to send your: Full name, PHONE NUMBER and a paragraph or two describing your financing needs. Please DO NOT forget to include your PHONE NUMBER.

Call us anytime 24/7. We are available for one-on-one discussion up to 11 PM Eastern Time and on weekends.


  • INVESTMENT PROPERTIES - COMMERCIAL MORTGAGE LOANS- Multifamily - $ 400,000 minimum loan amount. ($500,000 minimum if referred by broker.) Multifamily buildings must be 10 units or more. NOTE Possibly can do Multifamily loan amounts as low as 250,000 ($300,000 if referred by broker.) but must have 25% down payment.
  • OTHER INVESTMENT PROPERTIES Office building loans, self storage units, mobile home park financing, strip centers, warehouses and other commercial real estate property loans - $300,000 minimum loan amount ($375,000 minimum if referred by broker).
  • RAW LAND LOANS OR LAND DEVELOPMENT LOANS $1,000,000 minimum loan amount.
  • SBA LOANS-$500,000 minimum loan amount. ($600,000 minimum if referred by broker).
  • OTHER SMALL BUSINESS LOANS (NON SBA)- $500,000 minimum loan amount ($600,000 minimum if referred by broker).
  • FACTORING AND ASSET BASED FINANCING These are business loans using accounts receivable, inventory, equipment & real estate as collateral- $1,000,000 minimum loan amount.
  • OTHER TYPES OF FINANCING NOT INCLUDED ABOVE - contact us for minimum loan amounts.
Copyright © 1997-2020 JS Inc./Barclay Associates-All Rights Reserved
Page copy protected against web site content infringement by Copyscape

BROKERS and other intermediaries- WE WELCOME BROKERS. It is EXTREMELY IMPORTANT that you [CLICK HERE] to obtain full information about our referral fee program and our referral fee rates to brokers.
  • We DO NOT finance residential properties-only commercial.

To quickly move around other major areas of our website,
[Financing Overview Page]
[Commercial Mortgage Loans]
[Income Property Loans over $2 million]
[Small Commercial Mortgage loans]
[PO Financing]
[SEARCH our site]
[INDEX to Site]
We welcome brokers-for more broker information:
[Brokers Click Here]
[Multi-family buildings]
[Office buildings]
[Industrial buildings]
[Real Estate Developers]
[Shopping Centers]
[Mobile home parks]
[Hard Money Loans]
[Raw land loans]
[SBA Mortgage Loans]

Copyright © 1997-2020 JS Inc./Barclay Associates-All Rights Reserved
Page copy protected against web site content infringement by Copyscape