All Forum Posts by: Ash Patel

I hate to rain on this parade but my experience has been quite different.  Here are two examples:

• Vacant/water damaged office building purchased for $220k. 
• Invested $130k and fully leased one year later with discounted rents.  
• Income approach at a 10 cap would have valued the building at $550k

I needed to offload this property and had a buyer on the hook for $400k as long as the building would appraise for that amount.  Every appraiser I called told me there is no way they can approve that value in one year's time.  Many told me that they did not want to risk losing their license and could not come close to that valuation.

Example 2:

Purchased a NNN Strip center with regional/national tenants for $620k. 19% cap rate. This was listed by a residential realtor that clearly didn't know how to value the property. My appraiser was dumbfounded at the low sale price and made the seller sign a statement as to how they arrived at the listing price. My appraisal came in at $870k.

With some minor improvements and 5/5/3 years left on the leases, I was selling the property for $1.1m (10.6% cap) a year later.  The deals fell through because no appraiser would value the building that high in one year's time.  I finally sold the building for $1m to a mega buyer from NY and he immediately relisted it for $1.7m (7% cap).  

This may be a micro problem related to the midwest but appraisers around here are terrible.  

Those are the types of properties I dive into, except for the C- neighborhood.  You will definitely want equity partners.  Ideally one of the partners should be full time on this project.  If you can make the proforma work with severely discounted rents, may be worth pursuing.  I would make the building stand out with lighting, facade and landscaping.  You can keep most of the offices white boxed and start marketing.

I would say the difference is with residential, there are now a lot of government requirements that need to be met.  If the application and underwriting aren't perfect, they can't sell the loans.  With commercial, the loans don't have the same oversight.  With smaller commercial lenders, the underwriting is often under the same roof.

Once you establish yourself with a lender, the process gets way easier.  They typically just ask for updated financials and tax returns.  I can't imagine a lender not wanting tax returns even if the asset rocks.

I would post this in the commercial multi-family forum.

@Chasity Jones - The market is at an all time peak and then some.  If your funds haven't performed well, its time to restructure.

I just made a calendar appt to buy that book in five years when my daughter turns 12.  Great story and you are correct, a lot of us wonder how to pass on this knowledge without boring or overwhelming the kids.

Also, check with bankers.  Tell them you will finance with them if they send deals your way.

Do you have any experience in running hotels?  Why would someone entrust their failing roadside motel to you?  If that's what you want to do, start working nights as a front desk clerk, move up to night auditor then manager.  After you have successfully GM'd a hotel, you will be in a better position. 

There was a long thread on this same topic a few weeks ago.  Do a search.  The responses were overwhelmingly negative.  Is there a reason you are looking at office condo's vs other types of properties?

Who cares what the broker states, its what the lender considers it.