All Forum Posts by: Account Closed

Surprised that the county records does not have a name. California is a open record state so finding ownership and sale records is pretty easy. Once you have a name, then you can go to the Sec. Of State office and find the incorporation documents which should get you to a corporate agent or rep. for the owner.

Best advice I can give you is to put together a great team of managers, lender, engineer, lawyer, etc. Ask lots of questions, and recognize that lager deals are primarily for cash flow. Its very hard to find and even harder to finance "fix and Flip" commercial deals.

Feel free to reach out to us offline if you have any specific questions.

Wow! So many questions but I assume that you have good legal representation with respect to the obvious liabilities of this transaction. That aside:

1. I assume that you are pursuing this approach to provide higher leverage in the deal. Unfortunately, lending and appraisal rules will need a history of sales so that for deals that are less than a year old, you might have issues with the value, hence there may not be much difference with respect to new vs refi debt.

2. With a $200K NOI I assume that this deal is valued in excess of $2.0M. At that level, you might be able to get a non recourse loan.

3. I have done deals similar to this but we acquired the Partnership Interest which allowed us to refinance the existing partnership without a real estate sale. That gives us history and eliminates a "sale" valuation. We then used the proceeds to buyout the partners. Tricky and very risky but if the partnership is closely held - it can be done.

good luck

Depends on size and leverage. Generally under $1M you are going to have recourse unless you give up a lot of leverage. Over $2M there are many more nonrecourse lenders with high leverage possibilities.

I agree with Upen but I believe what you are asking about is actually what is called a credit facility. This is where you are borrowing against "your" total portfolio. Another term is a line of credit. In either case the concept is that you have significant net worth and income for the overall loan level. The term portfolio loan is most commonly used in the banking industry as described by Upen as a loan held by the bank and not sold. The possible advantage is that the bank might be willing to offer terms that do not comply with traditional secondary mortgage markets (ie sellable) and hence you could get a better deal. Unfortunately, in today highly regulated banking environment, such loans are only available to AAA+++ clients (the kind that do not need the money).

Hope that helps. 

I am assuming that you mean fully amortizing over 15 years. There are many lenders that will do longer amortization but getting past 15 call will be tough.

John:

We would very much like to talk with you about this project in more detail. All your questions are good ones and the only one I can give you a definite yes/no is regarding tax credits.

If you are talking about LIHTC then my answer is no. Unless the project is in a qualifying location, the cost, time, and restrictions would most likely not be advantageous.  If you are talking about historic tax credits, then maybe. If the property is under historic controls, then the additional cost of compliance would make the tax credits attractive. If not under historic control, then getting tax credits needs to be weighed against the cost and hassle of getting the credits. Lastly, if you are talking about energy and other tax credits then most likely yes.

The percentage occupancy is about right but having owned both, there is no comparison. Hotels are a business with multiple income streams and much more operational issues. Additionally, marketing is a daily activity and "flag" relationships are critical in some markets.

Research the market, talk with residents, meet with real property managers (not real estate agents), be skeptical.

As for numbers, revenue/rent is king, always over estimate expenses, never forget maintenance, and careful with debt.

Lastly, appraisers, lenders, brokers, etc all have good advice and you should listen but unless they own an apartment project be wary. On small projects stay away from percentage norms, count every penny. A 10% market vacancy may be statistically correct but if you own an eight unit project and turn one unit a month, your turnover vacancy is 12.5% before even talking about market vacancy or tenant default.

Go forth and conquer.. experience is life best teacher

Mindy;

There are far more good stories about property managers than bad.  The problem is that the being a property manager is like being the operating officer of a company. The owner is the share holder and the tenants are customers.

If you only judge you PM by economic returns you may be setting your self up for failure. Increase cash flow at the expense of the value of the property is usually the biggest complaint. It looks something like this:

Owner wants more cash flow, PM cuts costs, tenant quality drops, rates drop, maintenance suffers, vacancy increases....REPEAT.  Ultimately the property value declines and the PM is to blame.

I call this a death spiral and many properties fall victim to this. How often have you been shown a deal and told it has been mis-managed or run into the ground by the previous owner?

If you are looking for a good property manager, then for me the first thing that manager should be doing is providing me budget of what to expect. Not the other way around. Once you agree on a budget, then you can fairly assess if the manager is any good and hold them to that budget.

Lastly, property managers like all things come in all shades and varying levels of ability. Much of what they do is not seen by the owners but felt in indirect terms by the overall performance of the property. My experience is that most property managers can do an ok job and that a great manager may only slightly out perform an average manager. A bad manager however will cause you more pain and money than you can imagine. Horror stories are everywhere but talk to the residents when interviewing a manager not the owners. After all its the customer that pays the bill and a happy customer is good business.