All Forum Posts by: Rainier Guiang

I wonder if any of you can help me with this. A group of medical doctors and I bought a medical building last year under an LLC. We used funds from the medical practice (not the LLC) to do tenant improvements specific for the medical practice. Can we take the section 179 accelerated deduction (100% I believe) for the tenant improvements though the medical practice (like an expense to the practice)? My accountant says that since it's considered a "self rental" (our practice is the only tenant for now and we are all members of the LLC that owns the building) that the accelerated deduction may not apply. Is this true?

@Account Closed - thanks John, after doing some research it looks like non-recourse loans are only available from private lenders. The property would already be the collateral but they also on top of that want a personal guarantee. Ideally I'd want the loan to be liable only to my LLC which holds the property. However I havent found a commercial bank willing to do this.

Hello, I'm in the market to do a commercial refi on a medical building in California we bought for $2 million which at the time was only half occupied.  It is now fully occupied all with leases of five years or more, one being my own practice and three other medical practices.  We currently occupy about 65% of the space but just signed a lease to another doctor so our portion (owner occupied) is down to about 40%.  However, the other doctor hasnt moved in yet and his lease will execute in November so technically, we still occupy more than 51%.  

Anyways, are there any banks willing to do a competitive rate non-recourse loan?  I estimate the property to be worth about $3.4 million now.

Thanks for any input!

@Nilesh Makhija 

 Hi Nilesh, I think I am more of a buy and hold forever kind of investor.  My goal is passive income for retirement. As a business owner, I am limited in what I can put away for retirement since I have employees. So 401k plans and other "qualified" plans are so limiting.  I also dont have much faith in the long term stability of paper assets. 

@Bryan Hancock Yes, that is the plan.... wash, rinse, repeat formula. Since we bought the building with no money down, I wont really need to take out equity since the business should be able to qualify for another no money down loan as long as we can refinance the building with a non-recourse loan under the building's LLC. I dont know if that is possible to do however since most lenders are still asking for personal guarantees. I guess I should be researching where to find a non-recourse loan. Thanks for the advice!

@Bryan Hancock 

Hi Bryan,  

When I see we, I am talking about my business partner.  He and I are both physicians and own a single specialty clinic.  We used our business to qualify for the no-down loan.  At the time, we didnt really have an exit strategy, we just wanted the building for our own use.  Now that we have it and have most of it rented out, we realize, we could do this same formula again.  However, it was when we realized this that we went back and actually looked at the loan terms.  Now we see we are locked in and there is a penalty for early payoff.  However, I just thought maybe we could negotiate with the bank to do the refi without the penalty.  Otherwise, they will be losing out on a loan that will perform.  And they will lose out on getting to do the financing for the next building.  

Yes, you are right this is a good problem to have.  I wish I had more problems like this.  Anyways, I think I just answered my own question.  Thanks!

@Caleb Charles Hi Caleb, we used B of A.  They have a practice solutions program for physicians.  The loan had to be personally guaranteed against our business and our homes though.  Hope this helps.  I know Wells Fargo has another program similar to it as well.  

I really appreciate all the great advice given and have learned so much from these forums.  However I have a situation I cant seem to find an answer to.

We were able to acquire a 13000 sq ft commercial multiunit building using a professionals (doctor, lawyer, etc) loan with no money down at less than 5% APR amortized over 30 years. There is a lock in period for two years where we CANNOT pay off the loan or make extra principal payments. After the two years, we can pay off the entire loan with a 3% penalty (of the original loan amount) in year 3, 2% in year 4, and no penalty in year 5. When we bought the property, it was vacant except for our business which took up 3000 of the 13000 sqft. We now have been able to lease out the entire building except for the last 1000 sqft. Because we have added value by finding long term renters (all leases are 5-7 years), the value of the property has gone up dramatically.

So my question, is the following. I would like to refi this building after year two, and remove the debt from our business and put the new refinanced loan under the LLC that owns the building. This would free up my business so I could take out another professional loan for no money down and buy another building. Now I would have to pay the 3% penalty to pay it off in year 3 which comes out to over $60k. But I calculated the added value of putting in those renters in the building at over $1.5 million. So is it worth it to pay the extra $60k through the new refinanced loan in order to go after another no money down building? My instincts say it's worth it. Would you?

Or would you take out the equity from the increased value of the building and use those funds to fund the next acquisition? But this would leave alot debt on the books for our business. Oh the possibilities seem endless... makes my head spin. 

Thanks in advance!

Suppose you had a paid off rental property and were able to pull $200k in equity for your next investment.  Given that the cashout refi is still a mortgage, what would be the best way to use the $200k? 

1) use the full $200k as a down payment and use more leverage to buy lets say a $750k multi family - in other words leverage to the hilt as interest rates are low!

2) use the full $200k to be a cash buyer of a property and get a smoking deal and then pull out the equity again to buy another? (hard to do this in southern CA).

Thanks in advance!

@Ray Browne Thanks Ray!  Those are some things I would have never thought of.