All Forum Posts by: Dustin Smith

@John D.  I'll be paying for water.  I know that the cost of a monthly water bill is nowhere near worth the cost of adding the water meters.  Plus tenants will likely use roughly the same amount of water regardless of whose paying for it, because frankly it's cheap. You have to remember I'm in ND/MN, not Cali. Luckily all of the wiring appears to be up to code and centralized enough that he figures there won't be that much additional expense.  Plus often times the electric company will provide the meters.  

@Richard Allen it actually turns out it can't be a retirement community anymore.  The commercial kitchen is on the lower level, and to be up to code, the ceiling would have to be raised 2 feet.  I have a big project on my hands now.  No way am I touching a 2 foot building lift for a rental situation I have no knowledge of or desire to be part of... The legal issues with assisted living alone are enough for me to say no way, Jose.

@Aaron Junck that was my next move if things didn't work with my broker.  But, I basically don't want the duplex after my visit today.  Sketchy long term tenants, sketchy owner and sketchy building that probably doesn't meet code.  Not worth it.  

Also @Curtis Bidwell I don't think he has enough equity to do any type of carry back on either property. I actually found out today that I can get the property 15k cheaper than what I was going to offer, so I can likely offer the GC a better down payment.

@John D. he thought he could do all the meters for $6k.  I'll certainly have the project bidded, but if he will guarantee me that it will be under $200 in my time frame and I won't be responsible for anything over $200k (appliances and cabinetry, etc. included), I'd do it in a heartbeat.  It may be over what I could get for it, but if that works I'll basically get the property without a penny invested.

@Curtis Bidwell things changed today with the duplex.  After visiting it and meeting with the owner/agent, I basically don't even want to touch it.  If he really is getting what he claims in rent, good for him.  Not worth it for me.

Are there legal or moral problems (worth losing sleep over) with that system if it does work?  I think I could make that arrangement, or something similar, work for him.

Well an update on the deal.  Looked at the property yesterday with my GC, and he thinks he can easily do the whole thing for under $200k.  I found out today I can likely get into the property for $165k plus closing costs.  Based on the same numbers I would use to analyze any other investment, I would be a buyer at $560k.  

Also, is there any reason why I can't negotiate a 10% down payment with my GC, but bills me for 30% and use the 20% over the down payment to pay the interest charges?

@Curtis Bidwell even if I can get a $150,000 property for $100,000? Seems to me that should be more than enough security for them. Could it work to say it was a $180k/$120k split, get the HML for $200k and say I've got $20k cash down? Or better yet a $150k/$150k split HML to $180k with $30k cash down on the duplex? The duplex should cash flow around $170/month/unit on conservative numbers. I'm assuming 10% vacancy, whereas our local average is around 3.5%

Hey all, 

Interesting situation here.  I have two properties on my radar in my area, and I found out a couple days ago they are owned by the same individual.  One is a fully rented duplex and the other is a former retirement community that I'm looking to turn into a 6 unit apartment.  I found out yesterday that the guy is underwater on the retirement community and is selling the duplex to make ends meet with the bank, and he will accept a killer offer on both properties. Between the two of them he'll let them go for $300k, originally asking $450k.

I'm looking at a hard money loan to get the retirement community and to take care of the conversion and refi into a 20% down 20 year commercial mortgage.  My mortgage broker basically told me he would be on board with this and I could get into the commercial mortgage for nothing out of pocket.  

I'm anticipating paying $180k for the retirement community and $120 for the duplex. My mortgage officer says that even at 80% LTV, they would still likely want to see 20% down in cash for the duplex. Is there any reason, being that I'm getting both properties, that I can't switch the retirement community to $200, drop the duplex to $100 and tell my broker I dropped $20k into it? I'm a creative finance guy and don't want to drop anything more into this than I absolutely have to, or have available for that matter

Also, is there any reason that in the hard money loan, if I could negotiate with my contractor a 10% down payment remainder due upon completion, get billed for 30%, use the overage for my monthly interest payments, and refi at the completion of the project? The HML is only into property for the $200 or $180 depending on the answer to the above question plus closing costs and 30% of the work. Is there potential here or am I completely off my rocker?

Any insight would be very much appreciated!

@Robert Valenti absolutely. I really appreciate the insight. I'm anticipating a shocking number, but I figure I can put $230k into the rehab and still make adequate cash flow. But that kills my hopes of a hard money rehab. I guess we'll see tomorrow how everything is configured and what ways I can try to save on extra work and cost. 

@John Whittle I don't know much about HVAC, but the property is already equipped with baseboard heat.  What would be your recommendations for ventilation and AC?

@Travis Sperr I talked to my commercial mortgage broker today and he said it sounds like something he would be on board with.  My appointment to look at the property got switched to tomorrow, but my contractor is coming to look at it, so hopefully he'll have some insight into the time frame we're looking at.

I'd also appreciate any insight on project costs.  I still need to get final information for costs, but this is what I'm thinking.

6 units.  4 units 3 bed 1 bath 1200 sq. ft. 1 unit 4 bed 1 bath 1500 sq. ft. 1 unit 4 bed 2 bath 1700 sq. ft.  Assuming only the 3 bed 1 bath units, I've figured for each unit:

1. $1,000 in flooring
2. $1,000 in doors and trim
3. $100 in paint/stain
4. $2,000 in appliances, including stove, dishwasher, refrigerator/freezer, microwave/vent and water heater
5. $2,000 in cabinetry (Home Depot pre-fabricated)
6. $1,500 in electrical work
7. $4,000 in construction
8. $1,000 in plumbing
9. $1,200 in miscellaneous
10. $900 in sales tax

I know things like flooring, appliances and cabinetry are probably light, but I have a bulk deal with Home Depot that helps quite a bit.  Anything I'm missing or that is out of line?  I can basically spend up to $230,000 on the project and still be ok, but that takes me out of the hard money arena.