All Forum Posts by: Daniel Thomas

@Daniel Thomas - for what its worth, I've found that no, money doesn't find you, even with smoking deals. I threw a lot of deals in front of my lender, and I knew I had a solid one when they came back quickly and said "no problem, we can close". Most commercial lenders are pretty strict on DSCR and LTV ratios right now, and when they are OK with a deal, then you've got a live one.

They also have seen about a million cases of newbies getting in over their heads on older properties with deferred maintenance.  Rehab costs and keeping a place running are no joke.  I've got 15 years in the trades and I still get my butt kicked with older buildings.  Can spiral out of control pretty fast.  

Good luck to you. I try to not look at properties until I am financially ready to purchase and have talked to a mortgage company. That way it saves you from heart break.

I think the real question here is how subjective we are when we talk about the deal in "find the deal and the money will follow."

I, for one, do NOT view this as being anywhere close to being a "deal". You're essentially paying retail for this property based on the purchase price being listed as 150k and the ARV being listed as 150k. How is that a deal?

Returns alone don't make it a deal. The second you turn the key after you buy the thing, you're underwater. I say that because as soon as you go to sell it, you'll be taking a loss when you figure the closing costs of the sale and the fact you're gaining zero in equity.

So if you're wondering why a bank or someone else isn't lining up to lend you money, that would be my first thought - money does typically follow when you have a good deal, but that is NOT a good deal.

Most investors view a "deal" as purchase plus rehab coming in at 65 to 70% of the ARV. So if you were to get this thing under contract for 105k, then you'd see the money follow. This is simply not a good deal.

Thanks @Jay Hinrichs!  I just know that I've experienced some leasing pain that I was not anticipating recently, and I'd hate for a newer investor to underwrite using rents and time on market data from 8 months ago that is no longer valid.  I am hearing from larger PM companies (not just my own) that leasing has definitely softened due to increased saturation of apartments in midtown, and this is also the worst time of year to get stuff leased in the midwest (OK, maybe January/February is the worst).

I was able to get really good rents and things rented quickly this spring and early summer, but the length of vacancies started getting longer the later we got in the year, and I have a couple units in the same area that have been vacant for 30+ days with rent reductions/concessions coming.  

Hard to know this stuff unless you are already active in that particular part of town. 

@Owen Dashner excellent post that is actionable to the exact area other than all of us from all over the US commenting on this in general terms.

If I could vote 3 times for your post I would and if I was @Daniel Thomas  I would be buying you lunch today or a cup of coffee :) 

@Daniel Thomas, I would advise you to be very cautious with your pro forma rental rates and your vacancy percentage projections.  Urban Village/Harvest and have brought a LOT of new units online in that area and it has made it more difficult to get quality tenants quickly.  I have a lot in midtown and leasing has been more difficult across the board recently, including C class.  Rents on paper don't equal real money, and even if you get your target number, it may take longer than you projected, leading to higher %.

I would also mention that this may not be as fantastic of a deal as you think.  Conversions like this one built in the early 1900's always trade at a discount to built for purpose stuff, especially considering the shared utilities.

I like the gentrification going on in that area, but I don't like the fact that there are so many new units becoming available.

Good luck!

If your contract is assignable you could essentially wholesale it for a fee. That sounds like a decent deal unless it’s a bad part of town. I’d probably be interested if I️ bought in Omaha lol.

If it’s not assignable then you can explore having him resign but that would be tricky. Your other option is to find a commercial lender who will lend on it. That’s probably your best bet.

Or you could ask for owner financing and use your investor as the money down (but they’d have to be okay with second position). You have options you just have to get creative