All Forum Posts by: Scott Sewell

Hi Gregory,

I'm confused, are we talking about plumbing vents (ie: pipe of some kind) or ventilation fans and duct work? Two different animals, one definitely needs a cover or cap of some kind, the other does not.

Can you clarify?

Right on Randy F.! We went to one seminar once, it was worth the $400 to learn that we NEVER need to do it again. We should do coffee sometime. Shoot me a PM if you want.

Jesse Holmes: Don't worry about the salary, BUY MORE 4 PLEX's!
BRAC hasn't effected Anchorage much, other than to combine the AF and Army base but, it has effected some of the other communities up here.
"I love this new game so much because it caters to both the safe and secure and the exciting and challenging sides of me."
I feel the same. See ya 'round.

Thanks Karen Margrave, that is what I'm looking for: Options.
Jesse Holmes: I wish we had a resource like BP when we were starting out, keep watching, listening, and posting!

Jesse Holmes: We are in the middle of refinancing another property, when that's done we should have appx. 150K but, it has to go into another property. In the meantime, we could draw on a 401K for funds but, that's a once a year deal and has to go back in the account in less than 60 days or there are huge penalties. So, as others have said, we want to be sure of our numbers before we "pull the trigger".
Brandon Turner: I like that idea! Especially if we could "build in" our 20% equity for take out financing. Been having trouble finding any here though, as well as any active REIA.

Thanks Guys,
Karen Margrave, As far as the work, we'd sub as much as possible and act as the GC/Project mgmt. (as we've done before) As to Land Use: still need to verify but, our understanding is setbacks, yard space, landscaping and parking should remain the same (unless there are drastic changes should have enough room anyway), may need to sprinkler, if so, would want to rough in for future as well. We're using numbers from past rehabs (plus contingency) as a base and an average prices for new construction (as best we can determine) but, you're right, still need to verify.
Jon Klaus, we're on the same wave length Jon. that's kind of what we envision. We're projecting gross rents @ 55k (with 5% vacancy - Anchorage and our average is under 1%) based on other property we have in the area. And yes, the hope would be phase one meets expectations and we add 4-5 more units and hold.
Brandon Turner, yep. 50% rule, estimating take out financing @ 4.25% for 30yrs, this would change however with phase 2 (commercial rates). We have a some time (we think) to verify #'s (working on that as we speak). We've done enough renovation to have those numbers pretty solid, but the new construction (to the existing building) portion is harder to nail down (i.e: following up on Karen's comments and) as there are different strategies we're looking at. I like your either/or approach, but I think Karens has merit as well.
We're most interested in strategies for approaching the owner and structuring financing, any 0% down ideas?

Hey BP Nation! Hello from Alaska!
We need some help in determining an offer. We’re looking at this as a buy and hold/segway into new development. We’re interested in a property that has serious possibility for current (or near future) income as well as future potential. It’s a large lot zoned multifamily (current zoning would allow 7 units, new zoning will take effect 2014 and allow 9, and this zoning allows multiple structures on one lot) and a well built old house that could be rehabbed into a four-plex. Strategy being: Rehab the existing, generate income and track record, then proceed with new development.
The property was for sale last year. It started out at the city assessed value of $225,000, and after a few months and no offers was dropped to $160,000 (still to high for our purposes) and it went off the market a few months later. The owners own it outright and we believe it will be back on the market soon, and we’d like to get it under contract before that happens.
We're estimating it will take (+/-) $175,000 and 4-6 months to renovate/ reconstruct it into 4 units but, our numbers indicate that even at at purchase price of $140,000 it should still throw off a 20% ROI (@BrandonTurner, we wish we could buy 5 units at your prices) and have an essentially new building.
Old, run down four-plex’s in this area go for $350-425K.
We could pay cash for this but, as we’re looking at a serious project (for us) and all the variables that come into play, would prefer to use as little of that as possible. If we made a cash offer we wouldn’t want to pay more than $110K to make sure we have contingency funds. We’re getting ready to contact the owner and make a pitch, so.....
Our questions are these:
How would you approach this owner/structure the offer?
(Obviously the $110K cash offer would come first, that could work very well for us
but seeing as they let it go of the market at $160K we’re not sure they will go for
that.)
Would you approach them about owner financing? If so, how would you make it
appealing?
How would you arrange the financing to carry through the project at minimal risk/
expense/maximum benefit to you?
@KarenMargrave: Any thoughts?

Hi Joseph,
I'm not sure I can be any help with your specific questions (I don't know what an SBA504 loan is and have only a little experience with seller financing) but, at that price this doesn't look like much of a deal to me. This is just my opinion and there are a lot of people here smarter than me. However, this may be something to bring to the table for negotiations.
Just using the 50% rule the Net Operating Income is $1875 per month, and a commercial loan (80% LTV=264,000@6% for 30yrs) payment on this would be $1585, leaving a $290 monthly cash flow. Or $3480 annual, about 5.3%.
That said, the thing I like about commercial property is that the value is a direct reflection of the NOI. An appraiser will have a multiplier (the Market Cap Rate - specific to the area and condition of the property) he will apply to the NOI to determine a value for the property. This could work in your favor for negotiating the price and it definitely can work in your favor for creating equity! It has for our investments.
As an example:
Net Operating Income = 1875 x 12 or $22,500
Meaning at a 10% Market Cap the value is = 22,500/.10 or $225,000
If its a good area, in good condition and newer building an 8% Market Cap would look like this: 22,500/.08 = $281,250
These figures, or something akin to them WILL come into play when this property sells.
The Market Cap Rate also works in your favor if you can reduce expenses or raise income. When you do the math, every dollar of extra income (or reduced expense) @ a 10% MCR equals $10 in value added, $12.50 @ 8%!
Check out the podcast with Al Williamson and some of his posts/blogs.

Hi Cristina,
Welcome to BP and "The Great Land".
@Randy F is indeed up here (although we haven't met yet) as well as myself and some others. Ditto on Jon's question: What sort of business/investing are you into?

Brandon Turner, tried to ask during the show (and I know there's lots of info, but I haven't looked yet but,) what kind of terms are typical in a Hard Money Loan?