All Forum Posts by: Champak Shah

Hello Deion -- Brian and others have explained and made it clear --here is my
thinking --There is plenty of money ( private ) available --and every one is looking for safe but high returns. It seems like --you have not owned a single commercial property or managed your self. When you do not have any money, you have to start small and work way up -- its easy to find partners, investors, once you have some track records.

You want private investors to put up 20-30 % equity --meaning 100% financing. Then why some one do that. Investment Bankers even don't loan more than 90 % -- including mezzanine. Some lenders may go up to 100 % for
existing clients --where they have good report. And, if you are talking about a
large property --they also minimize risk buy joining forces --i.e. have three or four lenders make a loan as a consortium.

They are NOT struggling. Plenty of investors out there and plenty of money is available.

You say --property has great financials and established --then why they are selling ? Why they sell to you and NOT others with cash. Also-why you can not convince Owner ( Seller ) to become a Partner or take a second mortgage for
30 % of equity. Of course --some lender will NOT allow that also.

Large Property --big enough to attract investors -- Sorry --many private investors do not feel comfortable with large properties --they want to sleep at night. They diversify their investments in five or ten properties --and not in one. They may also invest in different type of properties.

Deal and numbers make sense to you --may be -- but Investors look at worst case scenario. That's why they want Owner to have his own cash in the deal.

I had two large hotels in Las Vegas and Michigan -- used to be worth $120 million and Broker was selling it for $35 million all cash. Another one in New York --was $400 million and sold for $160 million. Similar comparables happened in smaller scale also --in Hotels and Retail Centers --just take out few Zeros.. What happens then --Investors loose everything ?

What happens in a worst case scenario ? Tornados, Major Fire, Murder or drugs at property -- vandalism etc -- You need to have enough liquid cash --reserves for repalcement and vacancies --in addition to 30 % equity.

Yes-- Brian answered --about management --Realtor and Mortagge Broker mean nothing here --they have NO experience in marketing or managing the property. Even Corporate Lawyer does not have any experience --unless he owns some Commercial ( similar type ) property.

You did not mention --what type commercial and how big are you planning to buy ... Retail center, regional Mall, Hotels, Gas Station, Office Building, Warehouse, ??? what price --$5 million or $50 million ? What is NOI ?

Are you buying at 30 % below value --in today's market ? there are hard money lenders --who will do JV --equity sahring.

Back to your --question -- yes --it is possible, If you have a good busienss plan and how much you need. Regulation D --Private Placement Offering -- may limit to $2 million --check with attorney. Other way is Limited Partnership or Fractional Ownership--similar to time share --Need good attorney who knows --Securities and Fund Raising laws. Yes --you can buy a list of High Net Worth --people -- and send them letters or invite for a dinner at nice restaurant and do a Power Point presentation --if you have Confidence and be ready to answer questions --like Donald Trump.

I get so many emails --to invest --but I do not want to work 8 am - 5 pm job to manage properties --I work as Finder --

Best approach is to decide what type property --you want to owne --for long term -- buy a small and manage for few years --or work with a management company.

Once you get two --three years experience --then start aggressive buying.

Good Luck.

There are still many Non Bank lenders and many Non recourse lenders
for amount over $5 million --at 80% LTV for purchase --for smaller
loan amounts --25 % down required--but if buyer is serious --may take second mortgage for 10 % --For her --buying Bnak REO -- may need abridge loan with 30 % - 35 % down.

Hello Navin -- I have not read all the other responses--First you have to determine if the asking price is right --reasonable --good deal -- how about the rental comps in area for similar house and what about the demand --check local paper classified and on Craig's List --or ask Real Estate agents --if you still want to buy --what about financing and appraisal ? You need to have an attorney --do a Contract first , then title search -- and financing --Yes --need to have at least electricity turned on to show property to prospective tenants. How are you going to perform Inspection without all utilities on --HVAC, water leaks etc -- Join or go to local REI meeting and find out about local Landlord -Tenant laws or issues --

If you want to be an Investor --do not need a Business Degree --that's just to get a job - You need to find Apartments for Sale --within 50 miles --and get all info and do a comps --for expenses etc -- and rate of return -- you have to decide with confidence --what you want to do full time --manage apartments ? with minimum --or no rehab --you are looking at fairly new --less than 10 years old -- and may brick --low maintenance --so you compare --replacement costs, cost per unit, cost per foot for whats for sale --and narrow down to number of units --say 15 to 25 as first target and not 15 to 50 -- Figure out how much NOI you need to survive -- and what type investment do you need -- will he cosign with you on a loan --how much down payment will you borrow from him --when do you what to pay back --or offer him equity sharing etc -- Business Plan is your own objectives and Loan Package is different from a Business Plan --

It also depend --if it includes a business --such as liquor store, c store, several rentals -- a hotel --each will have different clauses --start with LOI --and have an attorney draw up actual contract --must have draft prepared based on buyer and seller understanding - also need to involve buyer's accountant --for break down of components for maximum tax benefits for new buyer --such as RE, Equipment, Inventory and good will.

How much money do you have ? what size ? how passionate are you ? You can start small in a sfr --ranch --modify --or build a ranch house with 6 bedrooms --or buy an old hotel --non franchise -- say 30 or 40 rooms and convert --

NOT a Good deal --prie is too high.
1 Church --NOn Profit -- not reliable tenant
2 Banks will not loan as Rental - Investment --may have to get private
funding
3 For commercial --too small -- for lenders
If I use cap rate of 10 % --price should be only $160K to $190K.
I used 30 % --for expenses.
4 If church is also on month to month --and SFR type floor plan with
kitchen --you may rent out to tenant or students -- then get loan as
Residential -- 1-4 units. Income may not justify price.

BEST TO LOOK FOR SOMETHING ELSE -- DONT GET STUCK.

OR get Option and try to sell -- worst come worst --loose some
deposit money.

Find a local Investor and Flip for $3000 Fee -- Depends how close to University of hospital --if you can rent each unit for $500 per month --
do the numbers -- I am surprised no one bought yet -- so cheap -
check repairs estimates -- make it livable -- depending on the age --check to meet building code requirements -- if its already foreclosed --and no one bought --make offer for $50,000

Need to have your Buyer's List first --OR move to Atlanta --plenty of buyers here.

Why go to a bank-- many Lenders have plenty of money. Underwriting is different for Commercial and MF -- MF is Residential and little better.
Problem is under $1 million -- few lenders will work on it-- so much refinancing coming up -- Management Fee ( 5 % ) and Reserves for Replacement ( 5 % ) is always deducted --standard procedure in MF and Commercial -- I am a Commercial Mortgage Broker --yes --if it is value added or needs rehab -- then we can look at Proforma Projections for three to five years --but then you get a Bridge loan OR const/ perm loan --rates are not 3.5 % --not even for SFR -- mostly for apartments
5 % to 7 % --except --in upper limits --$10 million up--its around 3.8 - 4.5 % -- for hotels ( my specialty ) --I quote 6 % -- 7 % fixed and 9 % to 12 % for bridge loan -- Sorry --I do not do in California --

Go for a 10 % down and let him hold tow mortgages --one for 60% LTV -- for 5 years --interest only --no penalty -- and one for 30 % LTv for
10 years --interest only --and make sure that he will sub ordinate --when you refinance the first mtg --for long term -- make sure to have positive cash flow --and NEVER pay off on rental investment -- try to keep positive cash flow and go up on rent 3% or $30 per month every year -- once you have enough cash =--pay off second mtg in 5 years