All Forum Posts by: Steve L.

This is complex:

If the purchase price is 1.9-2.3 why do you think 300k will cover purchase and rehab.  Typically you will be looking at 25-30% down plus the rehab/tenant improvements.  Why do you think 300,000 is enough money?

Have you discussed the lease rate?  Is it market value, mortgage payment?

Who is doing tenant improvements/lease up items for your space and the other tenant?

If your business doesn't put off that much extra cash do you think this investment will work?

My comments:

1. Treat them like separate transactions.  Your Business will rent the space from Property Joint Venture at market rate and sign a typical market lease.

2. Will the investment cash flow at market.  You will owe 2 million at 5-6% (to bank and partner).  With typical commercial real estate expenses will the investment cash flow?  If no... what is the benefit of being an owner?

3. If it does cash flow, I think the terms he suggested are overall fair.  There is something called a waterfall profit sharing structure.  Bank loan paid first, then his note, then partner distributions.  If you commit to a 10 year amortization on the property does each partner have to provide funds to cover the payment?  

Depending on the answers, I think his proposal could be fair.  

I am not sure I agree on your under $1 million valuation.  You're right a lot of investors don't like those deals, but that also means it is an opportunity. 

Business models of an owner operator and a syndicator are pretty different.  Syndicators make money by doing volume and taking slices.  Owner-operators can be much more nimble.

What about finding a partner and taking down a $1-2million deal with a partner?  

I am helping a family friend sell a long-time rental in Martinez, CA.  I just got the tenant out. 

I am looking for a contractor to view the property, take some pictures and give me pricing on a basic remodel to sell it.  

Anyone have referrals.  

Find a great deal and I'd be happy to buy it wholesale.  

Otherwise: 

- Do you have money in your IRA/401k/retirement account?

- Can you get a cash advance offer from a credit card?  That's where the deposit for the 2nd house I ever bought came from.  

- Find a JV partner.

Most lenders will require 10-20% total cost.  What can you do to raise 20-40k.  Sell a car, finance a car, line of credit?  

Roy, commercial in USA is typically 25 year amortization.  Residential is 30 year.  

@Pete Perez there are plenty of properties you can buy in those areas for under 250,000. What is your current living situation? Maybe you should buy a property FHA to start.

I don't think finding an agent will be a challenge.  

Fontana has 16 active listings under 250,000 (excluding condos).  

Redlands has 16 active listings under 250,00 (excluding condos).

Rialto has 25 active listings under 250,00 (excluding condos). Colton has 20 active listings under 250,00 (excluding condos). The City of San Bernardino has 232 active listings under 250,000 (excluding condos).  I own properties in all those cities and they make it work.  

Eugene, the same agreement covers for condos.  I believe there is a rider.  It would be pretty uncommon to use the Commercial Property Purchase Agreement for a condo.  

Make sure to talk to your lender in advance.  They may want you to draw the funds and season them in your bank account well before closing.  Otherwise they are considered borrowed funds.  

All of your math checks out fine to me.  Although your expenses are really low.  

The easiest way to add rocket fuel to your buy-and-hold portfolio is to buy properties that have more equity to start (eg: buy under market). You are projecting your total cost to be 116,000 and the ARV to be 105,000. Your basis being 9,000 above the market value.

Instead find a property with the same purchase numbers except make sure it is worth 150,000 after you have it performing. Refinance it at 75% in 12-months. Now you can borrow 112,500 on your total cost of 116,000. Your IRR will be much better. Do that 10x or 100x and it's exciting.

I closed on a mixed-use property in Dec 2014.  The landlord was collecting under 2,000/month in rent.  I paid 180,000 + 50,000 rehab.  I brought rents up to 5,000/month.  It just appraised for over double my total cost and I am now refinancing it and will get all my money plus some spending cash out.  You can do that type of deal an infinite amount of times because all the cash comes back.  

Originally posted by @Martin Z.:

Having multiple properties in 1 LLC can also save you $$$ on its insurance. The insurers I know of let you bundle properties under 1 umbrella as long as owned by the same entity.

 I have an umbrella policies over multiple entities and just name entities as Additional Insured.