All Forum Posts by: Bernard Chouinard

Hi – This is a stretch but I’m throwing this out there in hopes that someone can provide some advice or suggest methods I maybe over looking not thinking of.

Up front I know very little about commercial financing other than its based more on the building (NOI) than the person. I have been provided an opportunity to look at buying 4 buildings 16 units total. Building is just outside of Worcester, Massachusetts (Central Massachusetts).

I’m getting all the details but for the sake of this post high level over view is

$900K Asking price

$168K if all units are rented

$30K annually in expenses.

11 Units are rehabbed and rented 3 units are left to be finished then rented. Based on this very high level view does this sound like a deal to look into further?

The problem? I only have $30K in liquid assets to work with for down payment and if commercial lending is anything like residential I don't have the down payment needed. I've offered seller to hold the note for 12-18 months then refi into a conventional loan. Does that even seem possible? I know that works with BRRR as you're buying distressed multi's but this is not the case here. Hearing the sellers situations I don't think this would be ideal for him so its doubtful he'll go with for it.

A suggestion of having the seller hold the note of the down payment? So if down is 25% he would hold a note for $135K while the rest if conventional. Would banks even allow this?

These are just beginning conversations, I’m aware I need to do much more research on the properties as well as the commercial loan process but figured I’d would throw this out there to hear of any suggestions/recommendations. If you want to discuss a partnership in some way feel free to PM me I’m open to hear any suggestions.

16 units, in 4 buildings. 13 Finished, 3 would need finishing to rent. Currently 11 are rented.

Residential and Commercially Zoned

1,2,3 and 4 bedroom apartments.

Centrally located 2 blocks away from Spencer center.

Close to shopping, restaurant, public transportation, schools, church, town athletic fields, and the sportsman's club.

Off street parking for tenants.

Buildings have lead certificate.

New water and Sewer lines

New Gas lines

New Electrical Services with Sup panels.

Updated roofs on 3 buildings.

With all 16 units rented, rental income would conservatively be around 168,000 with reasonable rents.

Expenses are currently $30,000 annually.

I'm curious I thought I saw someone say banks are checking to make sure you're really living in the building if you're claiming owner occupancy. Does anyone know exactly what they are doing to verify? Other than checking your listed address or utilities? 

Hi Lathea - You're probably right, I might need a correction in my expectations which I will probably do once I get a feel for what my options are.  Thank you for providing those sites, I will check them out.  

HI - Looking for non performing notes aiming for $.30 - $.45 on the dollar.  Any recommendations please feel free to point them in my direction. 

@Justin Windham That was perfect, thank you very much for clarifying.  So at the end of the day utilizing a Solo 401K to start a business that provides myself an income is not feasible.  Although I could use it to help my business, any profits made go directly back into the 401K.  Which is somewhat of a funny notation to me as a salary would be considered a business  expense and the profit is the net amount after all expense are subtracted from the gross income.  

So I guess my question is. If this was you, and your only available cash would be sitting in an older 401K. What would you do to use that to get your REI going? I know its easier to say sit on it and save until you get enough but is that really my only option?

@Mark Nolan  @Dmitriy Fomichenko @Chris Seveney @Larry Fried @Justin Windham

Thank you all for your thoughts on this, it’s all very informative. I’ve also thought about the Solo 401K after all this would-be self-employment I’m setting up. My questions around that are:

• As a self-employed individual would that have to be my only source of income today I hold a full time job as well trying to establish a footprint in the REI community. An LLC is already established and the foundation set in other areas. Do I still qualify and does it make sense to run with a solo 401K?
• How do you establish what goes back to a 401K investment? After all my goal is to create income. Is it 100% of the profit that came from any investments made with the funds originating from the 401K must go back? Or do I establish a salary first as an expense then any profit left over must go into the 401K? Or is it a simple percentage?
• If all profits must go back into the 401K, how do you establish any of those profits towards building cash reserves or operating capital?
• Any suggestions on the best route or holder to utilize for the 401K?

Mortgage note investing was my 2nd investment option. I get the different ways of how folks would invest in the notes, their process, and exit strategies. But with that are more questions.

• Understanding you don’t buy notes directly from the bank as they tend to sell them off in large multi-million dollar chunks. How do YOU buy your notes? Do you buy them from a 3rd party seller or go directly to a hedge fund and get it from them?
• I’ve had a few local folks ask about a possible partnership. How would you establish the rules around the partnership when it comes to mortgage note investing?

I wouldn’t mind partnering up if I find the right person to do it with. 

Thank you @Daria B. for the respose.  Can I ask who you decided to go with for your SDIRA?

I have a little over $20K in a old 401K. I was going to role it into a SD IRA but after talking to one adviser that works with SD IRA's she's telling me not to do it as its not much $$.

I would like to this case towards REI. Should I just withdraw and take the tax hit and use as cash?

What are your thoughts?

I would love to hear your process in what you do when you buy a multi with existing tenants.  

Do you adjust rents if they are not at market value? 

Do you have them resign new leases? 

What is your process? 

Won an auction but deciding I don't want to move forward with the flip for my first flip.  I could simply let it go and the house will be offered to the next bidder.  BEfore I do this I"m curious if I could wholesale this deal.  

Would love some advice on this.  Thank you in advance for your help. 

-Bernard