All Forum Posts by: Ashan D

I know that with residential properties, you need to be there for your tenants or have a property management watch over the place.

Is the same true with commercial? Or can you basically write into the lease agreements that the owners will not be there to babysit the property and that all repairs and maintenance must be done by the tenant immediately/as required?

I guess I'll be the first to disagree with you. The real trouble with new guys is not acting too soon but a total LACK of action. This is what needs to be emphasized. I don't think I've seen a single RE book that doesn't mention the importance of due diligence somewhere.

That's good that you've created a plan, but you are setting yourself up for failure with such an aggressive one. You have no leeway for any bumps in the road and you underestimate the difficulty of getting a $1 mil loan (not going to happen with $50k)

If I were you I would revise the plan to have an intermediate goal of say 3-5k per month. Then you could give yourself some leeway and push back your 10k goal and it still won't seem so distant with that other goal to focus on. If 10k comes faster than you planned then all the better 8)

Well that's because you made a wild debt service assumption. (I should have done one myself actually) But with your numbers, 0 down? almost 7.9% interest? 20 year note?

Here's the same building using 20% down, 7.3% interest, and a 30 year schedule.

monthly debt service: $4,579
cash flow: $2033
per unit: $92

Pretty close to your $100/unit rule. But keep in mind this was one of the first listings I saw on a loopnet search. For this apartment, I think we can do much better after talking down the price a bit (not substantially) and finding actual operating costs which aren't likely to be 50% for a 22 unit complex.

Cash flow is not hard to find in every market.

Probably my favorite area for cash flow is upstate new york (I've read appreciation will be nonexistant for a long time in this area, but the cashflow is still nice :)

Here's a building that looks good from the first glance:

http://listing.loopnet.com/15139489

Pro Forma gross scheduled income: $158,700
NOI using your 50% rule (I actually like this rule because it provides a nice, quick, relatively conservative estimate of NOI): $79350
Cap: 9.5%
Monthly cashflow per unit: $300

So at least from the information we have this seems like a good deal right from the asking price. Sure it could have some surprises, but a building like this is not uncommon to find in upstate new york.

See this is wrong because it's not about how much of a discount you buy at, it's what cap rate you get. If you buy in most parts of cali then yes you need an outrageous discount to even break even. But there are are markets that you can do quite well buy near or even at market. Oklahoma city area and fort worth texas comes to mind. upstate new york also. I've seen some attractive areas around the great lake states as well.

Bottom line is you can't throw out a random value such as $100/unit is ideal, without factoring in the specifics of the market.

Why are you assuming he's only cash flowing $100/unit especially if he got a huge discount Mike?

Don't let that friendly redneck accent fool you, "The real deal" is also staged somewhat. I remember in one episode (when those same guys were on their old show) there was a side-drama about whether or not they should do a deck in the back yard of a small rehab house. It's not immediately obvious, but the whole 10 minute scene is staged. Then at the open house one lady announces in front of everyone "This house is just beautiful but one thing would have made it perfect: a deck" Riiiight... It makes for good drama but when I'm watching a supposed reality TV show I want "reality"

:wink: play nice guys

I have a question: What are you going to do when the balloon payment comes due? At the end of year 5 you still have about 685k principal on the 1st mortgage. Refinancing the 2nd into that would put the mortgage at 885k. Would a lender be willing refinance that amount if the market stagnated and the apartment was still worth only $1,000,000? Or are we depending on appreciation to reduce the LTV?