All Forum Posts by: Darwin Crawford

I'd turn to an online broker such as LendBase or Velocity mortgage.  

I am in NO WAY affiliated with either of them, but have had positive experiences with their staff.  very informative and professional.  

Probably goes without saying, but your personal balance sheet needs to look decent as well as your FICO.  Especially if its your first deal.  

As with any business, that needs sales, you must provide a good product (in your case, a space) at a reasonable price point (rent).  

I talk to a lot of people in landlording who miss this point.  I'm in a fairly high-demand market, but we had a flood of Class A space recently, and the fact is you have to be competitive.  

If you're trying to charge a lot of rent at a jalopy of a property, its going to be a tough sell, no matter what.  

So make sure its clean, understand that your commercial tenants need to make money as well, and sell your well-maintained product for a reasonable price.  

Also - the story about how to boil a frog is a good one on rent.  get them in the door, get them comfortable, and then cut the burner up....

@David Hamilton - first off, thank you for starting this thread, its been extraordinarily helpful to me.  I have 1 commercial property, and was just put through the wringer on the refinance.  

We were able to negotiate great seller carry terms for the interim, but that will balloon in Q3 of 2018, and I'd like to get something more permanent in place.  

2 specific questions, and if you need more information, happy to share...

a) the loan on this building will appx 50-55% LTV once current note matures, with a total loan balance of $240k. I have been told by several lenders that anything under 250K is tough to get placed - would you concur?

b) I managed, by a lot of hard work and a little bit of luck, to get a screaming deal in my home zip code. However, I was told during loan process that for the 1st 12 months of ownership the lenders use purchase price, rather than appraised value for the "V" in LTV. Is this commonly done?

I could sell the place tomorrow and walk with 6 figures (always have exit strategy), but I am a buy and hold guy, and would like to get it paid down and permanently financed if at all possible.  

Thank you in advance for any help you can give!  Much appreciated!

@Gino Barbaro - thank you for the response!  Yes, 5-caps....we have a lot of high-net-worth individuals here that purchase for tax reasons only, so they don't care as much about cap rates.  a 120-door asset traded here recently for a 5.2 cap, right in my neighborhood.  C/D class is going for 8-caps with lots of deferred maintenance.  

Do you track specific demographic or other information to explore other markets?  Employment centers?  Manufacturing trends?  Ease of transportation?  (cheap flights when something goes wrong...?) 

I very much agree with your strategy of well-run blue-collar apartments, and providing value, however it seems that everywhere in the american west is replete with "investors".  

@Gino Barbaro - first of all, your book is great.  read it many times, really want to break into mid-sized MFH (10-30 doors).  My biggest hurdle at the moment is financing deals.  I am in a super tight market (scottsdale AZ) and getting funding has been tough.  I have 11 doors right now (small commercial and some condos) and am looking at riding along for a year or two and then exchanging everything into a larger complex.  

The tough part is that in our market, there is a ton of money chasing deals and without having funding lined up already, you'll never land a thing.   Anything under $3MM in purchase is gone within days at 5-caps....and I just don't want to go out of state.  

@Jordan Butz - in a nutshell, here is my approach.  And no, I don't sub-meter anything, my tenants are the type of low-level solo businesses that value fixed costs above everything.  

1) Get an idea of current energy use

2) Raise rents to cover energy use

3) Aggressively manage energy use through building upgrades and efficiency

4) Keep the difference.  

#3 will differ depending on your locale, latitude, etc, but here in the sunny dry southwest, its basically as follows:  Roof coatings, Mini-Split HVAC units, the best windows you can afford (or glass block has a VERY high R-Value) and if you really want to go big, PV/Solar system.  

Diving down the rabbit-hole of where your energy usage lies has been a very eye opening experience for me.  Local utility just got approved for a 15% rate hike, so I'm leaning hard towards a solar system just as a hedge.  

This approach can work on anything from a duplex up to a 100K+ SF building.  Just a matter of scale.

I'm with @Jeff B. on this one.  Parking (like self storage) isn't an investment, its a business.  You'll have lots of help and advice from local government, equipment that breaks, and contractors to pay for re-paving, striping, barriers, snow removal, etc.  Not to mention liability insurance, headaches from customers, lawyers, and the like.  

Not to say its not a decent business, but you'll just need to draw your own line in the sand between "investing" and "running a business".  They are not the same thing.  

@Jordan Butz- FWIW, I just did my first commercial deal after looking at about 50 MFH's here in the valley.  Prices just too unrealistic.  Went small to start, shopped hard, negotiated harder, and got a net 10-cap in scottsdale with what I call "internet-proof" tenants.  I haven't been to Huntsville in a long time, but I'd imagine with all the growth that you could dig up some diamonds. 

Hair, massage, nails, and a two local bars have their back offices with me.  8 units, all on 3-5 year leases with auto-pay.  

I think niche commercial is best right now, the lower-priced stuff doesn't get much looking from the big boys, and you can get good deals still if you shop hard.  Don't be scared of older, master-metered buildings either.  Most newbies won't touch them, but with a little math, and some common building upgrades, they work great.  

A warning though - these type tenants tend to have more "drama" than a retailer or some office type.....I've been at this for less than 2 months and already getting sob stories.  

Love this.  I have 11 doors, mix of residential and commercial, and my better half and I rent our primary.  I self-manage in addition to my day job, so not having personal home maintenance was key for me.  

That, and where I live, we rent a $400k home for $2k/month with pool service and landscaping included, and a 3 car garage.  As a landlord, that sounds like the worst deal ever to own, so I chose to take the other position in the trade, so to speak.  

I won't buy a primary until the rentals will comfortably pay for it.  Big mortgages on primaries sound like a prison sentence.  @Chingju Hu FWIW, I think you're making a great call, especially in the bay area. 

Always, always, always at least ask for seller carry.  Just be upfront about your game plan and see what happens.  The worst they can say is no.  Most lenders on C-class want 35% down, some will go 30% but your rate will be higher.  

I'm in that boat now, closing a 8-unit with seller carry, and the bank was nice enough to give me their underwriting standards, so in 4-5 months when it looks better from a numbers standpoint, getting bank loan will be a cakewalk.