All Forum Posts by: Benjamin Aaker

Agreed with @Sergey A. Petrov. You need to know the local laws and ordinances. Beyond that, you do need to collect rent enough to make it possible to continue to rent the place. If expenses have been going up, you should be able to increase rent commensurate with that. Assuming the tenants are month-to-month, you could soften the blow by increasing small amounts over time. Of course, if you can't pay your mortgage, you'll have to raise rent more quickly. Nice of you to hold of on rent increases, but tenants have a hard time remembering that when the rent increase finally comes. If these are great tenants, then try to make it easy for them to raise the rent and explain why you are doing so.

@Rodney Sums Thanks for your comment. Not way off base at all. It's a great idea to have multiple exit strategies. This property is on a major arterial in Sioux Falls (Minnesota Avenue). Moving into retail comes to mind. We are zoned commercial - 2, so some kind of short term residential is a possibility. We have plumbing to the common area and one of the three suites, so there would be some work to make the change, but certainly an option if office completely tanks.

@Ronald Rohde PP is 7 years. That being said, I'm not immediately fully leased, so I have to add that to the period. Was this deal better than cap gains tax? I suppose I would have to compare that to what I would do with the money (minus the tax) otherwise. Multifamily can still be a good investment but people are bringing stupid money in right now, depressing the cap rates. Single family is out for obvious overpriced reasons. A good value-add MF is probably the only way to go. They still exist, but I would have to factor in the time it takes to find the deal while my cash is sitting in a low-interest rate, but liquid account. Thanks for your comment.

@Russell Brazil How has your office purchase gone in the past year? Glad you bought it or would you rather not?

@James Storey That's good to know. These three units are 1000, 1200, 1500 square feet, so pretty close to the sweet spot you mentioned. As an update, I got an unsolicited LOI for my second suite today. Doing some negotiating, but we are pretty close on terms.

@Taylor L. Thanks for your insight. I hope I'm one of the people quietly investing in Office going to do well. Except, not quiet anymore with this post about it!

I know that Zoom is taking over the office, but I had a 1031 exchange to do and closed on a Class B office building downtown a couple weeks ago. Out of three suites, there are two vacancies, and it's underwater, but will be cash flowing when I get my next tenant in there, even with a reduced rent. It's my first office building. I really think that office will come back as people realize that working from home can't be done 100%. Is this speculating, timing the market, or simply a good investment in a depressed time? I'd love to hear what other people are doing right now in the office sector. 

Not an appraiser here. Sorry.
The appraiser's view of whether the property is multi- or single-family won't matter to the bank / FHA. They will make that determination and that will have an effect on what amount you need to put down. That place is undoubtedly worth more as a multifamily as to make it single again would take a large amount of rehab money, so you will be happier with that lens for appraisal. Talk to your banker about the type of loans available. If you are going to use the place as a multifamily and you aren't living there, you are likely in commercial loan territory, and you will need to bring a minimum of 20% down.

Hard money could still be an option, but they want to be paid back short-term, usually less than a year. So if you are holding the place and renting it out, you won't be able to pay back hard money.

From your title, it looks like you've owned it for 'months'. Have you been able to increase rent from prior to the purchase? The place has undoubtedly appreciated. A refinance would probably be a bad idea because rates have gone up and you haven't owned it very long.

You should have a look at a business line of credit. Talk to your commercial banker. They will do an appraisal, on your dime, and you'll know how much equity you have. The bank will give you a line of credit for a certain amount (you usually have to keep 20% equity in the property, they will loan the rest of the difference of that 80% and the mortgage amount). So, for example, if the place is worth 100k and you owe 60k, they'll lend 80k total, leaving 80k-60k or 20k for the line of credit. You can draw as much or as little as you need to do your rehab. Then, you pay interest-only for as long as you need to with the line of credit. LOCs require an annual fee and occasionally a repeat appraisal to keep them going. 

Yes, just follow the rules. Here's an in-depth article for you:

https://www.realestateskills.c...