All Forum Posts by: Jarred Sleeth

@Joel Owens, I thought about an owner finance situation as I don't have enough cash on hand for a down payment. However, I'm not sure I understand enough about the ground lease.  I understand that sometimes the building can go to the land owners at the end of the term. If that's the case, what exactly is happening with the cost of the building in the first place? Where exactly is the equity?  What am I truly buying in the deal?  If I pay 500k for the deal, and pay that off, is that truly an asset if it just ends up being owned by the land owner in the end? 

There are no gas stations. It's just a typical 5 store commercial strip. There is a subway, an AT&T store, a hair salon, the owners business, and one vacant unit they are working to lease for a nail salon. I was told they are all leased for the next 3-5 years, and are NNN leases.

Thanks for commenting!

Thanks for the comments. I have tons of questions so I suppose getting more information on the lease agreement and rent rolls could help.

They told me they tried to buy the land as well but the owners weren't ready to sell yet. Could you explain what could happen at renewal? With 65 years left, I'll likely be dead at the end of the term, so I am kind of unsure about what kind of strategy I should be using here. 

Hey BP,

I was out yesterday doing some shopping and the owners of the store I was in approached me about selling their other location. I'm a frequent customer and they know I buy real estate which is why they asked. They own the building their other location is at. It's a 5 unit strip center in a good location with two nationally franchised tenants, their store, a hair salon that has been there for a long time, and in the process of signing on the last unit which will be a nail salon. They have owned the building since 1997, and it was on a 99 year ground lease with roughly 65 years remaining. 

I'm posting here in hopes of learning a little bit about this ground lease and what the pros and cons of such an investment would be.  I invest for the long term for cash flow. They are asking 500k which is about 100k/unit, and at that price it didn't seem outrageous or anything. It's not currently on the market, but they are older and are tired of dealing with it. I don't know all of the numbers for income/expenses yet, but I'd like to know if this kind of deal is common and if it would make sense before I sit down with them to get more details.

Does this sound like a deal to you? What would you do? They are motivated and as far as I know I am the only one looking so far.

Thanks!

Jarred

I've walked away from properties located directly next to schools.  Being near a school is great, but almost right on the property not so much. 

I've also done the same with fire departments, trains, graveyards, and major highways.  No one wants to live somewhere with lots of noise pollution!  I skipped the graveyard just for curb appeal, they don't make too much noise ;)

Innovative strategies for sure!  Certainly not what I expected!

Welcome to BP. I agree with @Russell Brazil, there are some great markets here in MD and you'll gain a lot more experience (and assume less risk) by investing close to home first.

Good luck!

 And 500k more investors in our markets. Is a growing population of real estate investors really a sustainable model? 

Typically, you can refi traditionally with no seasoning if you are not pulling cash out. If you want to cash out, you need to wait at least 6 months, sometimes longer. Portfolio lenders will be more flexible on this, but they will vary. We use a hard money lender that also has the ability to cash out refi after 90 days with a 75% LTV on appraised value.

Hope that helps!

Typically the HML will loan on a % of the ARV, mine for example will lend up to 65% of ARV at 80% LTV. You pay 20% of acquisition costs and rehab costs. You should be able to find one that will also lend on rehab costs, some lend 80%, and some will even lend 100%.

People come up with the money all kinds of ways. Through diligent saving, borrowing from family or friends, partnering, 401k loans, HELOCS, the list goes on!

Good luck and welcome to BP!