All Forum Posts by: Dennis Cosgrave

Wes Waggoner, that is not a bad idea. I would do that as soon as possible so that the tenants have sufficient time to think about it and decide what they are going to do. If you spring that on them at the last minute, they might resent the short notice and make it difficult for you. 

Derrick Walston, I would do the renovations first, and then refi. Once the renovations are complete and you manage to raise the rent accordingly, the property will appraise for a higher value which will make the refi easier. The great thing about having a multi-unit building is that you are still earning income from the occupied units. I have done it the other way as well; purchasing a multi-unit building and demanding vacant possession. If you go that route, you have added pressure to complete the renovations quickly. Servicing the mortgage starts eating up your cash reserves pretty quickly. 

I once purchased a 10 unit apartment building with 3 units vacant. I purchased the property and immediately began renovating the 3 vacant units. The remaining tenants saw the writing on the wall and moved out on their own initiative. Only one of the remaining tenants wanted to stay, agreeing to the higher rent, and he even moved out for 2 weeks while the renovations were done. It may not always work out that way, but it seems the smoothest way to do it. 

I am certainly not buying into the happy talk. The real estate market is holding up because of mortgage forbearance and the moratorium on foreclosures and evictions. Those policies are stabilising the market.....for now. Secondly, I am watching the beginning of the great migration from big leftist cities to smaller communities. With city governments capitulating to BLM and slashing their police budgets, that migration will only accelerate. Thirdly, it looks like there is a second lock down in the works. 25% of all businesses are already unlikely to re-open. A second lock down would only make matters worse. Yes, the Fed is pumping trillions into the market but that is unsustainable. The inflationary effects of all that money printing are going to be felt. Essential products and services will increase in price, while discretionary items will decline in price. Last but not least, we have the presidential elections coming up in 4 months and that will only add to the uncertainty. I am hard pressed to find any positive news in all this, with the exception of the increase in demand for housing in smaller communities. However, that will likely be a temporary event. I am certainly not suggesting that you do nothing, but I do believe a cautious and conservative investment strategy is highly warranted. 

I just finished reading the book, It's a Whole New Business! by Gene Trowbridge. It provides a detailed explanation of how to structure a syndicated investment, whether it involves one or more partners. The big take away from this book is that you need a competent securities attorney and CPA to set up the best structure that suits your particular situation. I strongly recommend you read it. It will give you a much better appreciation of what you are dealing with.

I once purchased a 10 unit apartment building with 3 units vacant. I purchased the property and immediately began renovating the 3 vacant units. The remaining tenants saw the writing on the wall and moved out on their own initiative. Only one of the remaining tenants wanted to stay, agreeing to the higher rent, and he even moved out for 2 weeks while the renovations were done. It may not always work out that way, but it seems the smoothest way to do it. 

Whether the seller paid cash or financed the purchase is irrelevant in most cases. The one exception is if the mortgage can be assumed. The seller is not going to adjust his price because he has 100% equity. If he paid cash, he might be in a position to hold seller financing. Most sellers will usually hold a note for no more than 5 years. Even then, you will likely have to pay a slightly higher than market rate. 

Jason Regan, not to state the obvious but a good real estate agent doesn't necessarily make you a good real estate investor. A good analogy would be a good car salesman does not make a great mechanic. A real estate license certainly gives you an understanding of real estate law and the buying and selling process. Until you actually get in there and get your hands dirty, you will never fully appreciate what it takes. My advice to you and Katalina is to partner up with real estate investors. Exchange your commission for an equity interest in the property and then get involved in the day to day management. You will learn much more than a real estate course could ever teach you. 

Derrick Dill, correction. The national debt in 2016 was $20 Trillion. Obama doubled the national debt in the 8 years he was in office. The bottom line is that debt can never be repaid, regardless of who is responsible. The debt disappears when the US dollar loses its reserve currency status. BTW, Congress controls the purse strings, not the president. If you want to be pissed off about the debt, shift your focus to Capitol Hill.

Jordan Berry, first of all you have to be aware that the situation exists. Once you are aware, you can formulate your own pro forma income statement by looking at market room rates in the area and average occupancy rates. Then compare the potential gross income to the number provided by the seller. That will give you an idea of how much is being skimmed. 

Another little trick I used is to look at electricity bills. The higher the occupancy, the more electricity is being used. So if the electricity bills on a per unit basis seem excessively high, chances are that the occupancy rate is higher than the seller is reporting. There may be other reasons for the high usage such as poor insulation or leaky windows, or maybe even an illegal marijuana plantation! Those variables are easy to filter out. 

The bottom line is, if the motel is in an excellent location and in good condition, doing that research could more than justify going ahead with the deal.