All Forum Posts by: Brad Hayden

@Shane Vork

Your current loan docs should spell out any pre-payment penalties, yield maintenance, etc associated with the current loan. 

New lender rate and terms, including seasoning requirements, will depend on loan type, loan amount, leverage, time held, value of renovations, current appraised value, operating business history and financials, credit history, etc. They may limit their valuation to original price plus actual cost of verifiable renovations.

If you have depository accounts and a good relationship with a local community bank, start there. 

@Eugene Reamico - I would start by answering a few questions:

How did the seller come up with $6.5M?
How did you come up with $4M?
How did you get the $5m in 5yr seller finance scenario?

Commercial property is valued by Replacement Cost, Sales Comps, or Income Capitalization. Income capitalization is the most applicable here since value is based on the income that the property produces.

What is it worth today (as-is) based on current operations, financials, and market conditions?
Once you agree on current value, then you can negotiate financing terms.

@Frank Greg -- I might be able to help. Let's discuss the details & see where it goes. 

I'll send you a DM with contact info.

@Joe Fairley

New development brings up a whole new set of questions:

What will these units look like -- size, construction, building layout, floorplans, amenities, etc
- will they be competitive in this market
- will they command these rents

$2.4MM builder cost
- seems low given the recent material price increases & the desire for higher rents
- does this include land cost, due diligence, zoning, planning and permitting, architectural fees, horizontal improvements, vertical construction, financing costs, title & closing costs, carrying costs, lease-up costs, etc?

Capital requirements -- you will need at least 25-30% of the total project cost

Competition -- are there any other developments in progress that will change the supply & demand before you get this finished

It might be worth $4MM when stabilized, but whether or not it's a good deal will depend on what it takes to get there. 

@Joe Fairley

I'm still missing some details. 

Is this a fully occupied property or newly built in lease-up or a planned development?  Those are 3 completely different scenarios.
What is the current occupancy and what are the current actual revenue and expenses?
Where did the $3000/month come from and why would 2/2 and 3/2 rent for the same amount?
Why would someone sell a property at 50% value -- especially in today's market?

@Gytenis B. -- I'd love to help if I can. I'll send you a DM with contact info.

@Joe Fairley  

Joseph, I have a few questions/clarifications:

What type of property/units
Who are the tenants & how are the leases structured
I don't see utilities in the expenses -- are they paid by tenants
I see landscaping & dumpster, but what about other maintenance and repairs
Where did tax & insurance numbers come from -- they seem very low
If its new construction, what is the capex expense, or is this replacement reserves

Thx
Brad

@DaJuan J Harris

@Andrew Moore is right. It's a loaded question and hard to answer without more detail, but here are a few questions that might help when evaluating most properties. 

• What is it worth today (as-is) based on current operations, financials, and market conditions?

• What is your investment plan; how will you increase the value? Is it as simple as increasing rental rates, reducing expenses, or addressing economic vacancy factors; or will it require repositioning with different tenants; or perhaps adaptive reuse to a different purpose; or …? How much will it cost, how long will it take, and what impact will it have on current tenants, operations, and cash-flow?

• Does it need minor repairs, major renovations, or other capital improvements? How much will it cost, how long will it take, and what impact will it have on current tenants, operations, and revenue?

• How will you structure debt and equity of the deal? Will you use a traditional bank loan or private non-bank financing? Will you bring in partners and/or 3rd party investors? How will they get paid? How will you get paid?

• Will the local market support your plan? “Build it and they will come” was a great catchphrase for a movie, but local market realities may not be so forgiving. Occupancy trends, population trends, employment trends, competition, traffic patterns, economic development programs and priorities, zoning, and permit filings are some of the factors that may impact your plan and the future value of the property.

• What is projected future value? Based on your plan and your best estimate of future market conditions, what will it be worth 2-5 years down the road?

• What is your exit strategy and timing?

• What is the projected performance of the deal? What metrics will you use? Cash flow, cash-on-cash return, profit, multiple of invested capital, internal rate of return, or …? Will it debt cover with positive cash flow? Will it meet your investment targets? Will it meet your partner's and/or investor's targets?

There are a lot of details, numbers, and work that go into answering these questions, but it’s the only way you can truly answer that final crucial question.

Is it a good deal … for you? Does this deal fit into your investment strategy? Are the risks associated with the deal acceptable and manageable within your personal tolerance levels? Will it help you achieve your investment / financial goals?

Understanding different financing options and being able to quickly engage the right lender for your commercial deal might be the difference between a successful transaction and a lost opportunity.

Schedule a loan consultation at carreraresources.as.me/

@Priya Shekhar -- I might be able to help.  Sending you a DM.