All Forum Posts by: Ben Dols

@Ben Dols

Bump

I'd love to get thoughts on whether this situation warrants a renegotiation of my current deal.

2 Years ago I put a commercial building under contract for $720,000.  It is a 2 unit building of retail type space.

Here were the terms:

$0 Earnest Money

We were able to put one of our businesses(A Salon, which is shut down by COVID for at least 45 days) in one of the units at a very good rent which was staggered from 6 months free, 6 months of $1,000 per month, 12 months of $2,000 per month, and then the remaining months $3,000 per month.  At closing we will get 80% of the rent we paid back as a down payment at purchase ($38,000)

We plan to purchase with an SBA 504 loan, so at closing we will move another one of our businesses into the other side which is currently rented out but lease will end.  SBA 504 requires 51% occupancy and very great terms such as only 10% down.

We also have a property adjacent to it under contract we will use to add an additional parking lot.  The purchase for that property was estimated to be $80,000 by the person selling me the building but turned out the best I could get was $150,000 with the actual seller.  This expansion is crucial to have adequate parking.

All in all with remodel the deal will be 1.2 million so $120,000 down.

In our State, both of the businesses we own which are planned to occupy the building are being shut down and its costing us a TON of money.  $40,000 in lost revenue for April.  It's devastating and it will effect our ability to get the $120,000 down.

Being that I put this under contract when the economy was great, and now its quite obvious that commercial real estate values will be plummeting, is it reasonable to renegotiate this deal?

My thought would be asking seller to increase kickback at closing from $38,000 to somewhere in the realm of $60,000-80,000.

Worst case to close I can refinance other paid of assets from the business, but it's not a preferable option, plus I don't want to pay 2 years ago market price, when that's likely no longer the value when we close on it 5 months from now.

@Adam Gollatz

Hey Adam, I do buy and holds and flips in Willmar, MN. I’d love to chat!

@Nicholas Covington

Let’s say for this question I’m asking specifically for a post rehab house that I’m looking to refinance.

How are you getting fixed 30 years on a commercial loan? We're talking loaned to an LLC rather than an individual correct?

I'm curious if I'm getting good rates from my local lender. I've done about 10 deals with them and they're extremely flexible. Right now they're loaning me 75% LTV on a rehab house based on what the appraisers opinion of what the ARV will be. So they're very flexible with me but here are the general terms I'm working with

25% down

5.5% Interest

15-20year AM

5 year balloon

I'm fully aware that I'm able to get a secondary market mortgage then quit claim to my LLC but because all of these are in partnerships I don't want to do that at the moment.

For a commercial lender what kind of terms do you get?

@Tyler Speelman

I don’t see the negative to them breaking lease early if they’re paying the full balance of the lease term.

Hey DuWayne.

I mostly self-manage, but I have one of my units with Westrom Property Management located off 19th Ave SW.

So far I have had a great experience!

First things first: have an electrician come out to see if it’s possible to sub meter. Depending on how the current wiring is ran it may reasonably affordable to sub meter. Billing the tenants every month sounds like a headache, especially when you will likely get into a “he said she said” situation with why the utility bill is so high. If you can’t sub meter then raise rent accordingly to include it all and put processes in place to help control utility usage. (Lock box on thermostat)

I use TenantCloud for all the same things and that has worked well for me. It also keeps track of all tenants applications, lease agreements, maintenance requests, etc

The 1% rule and the 100x rule are the exact same rule lol.