All Forum Posts by: Jeff Kehl

@James Dickens I'll take the cup of coffee... According to your analysis this property is worth $357k right? and the OP @Jeremy F. is considering paying $575k but thinks you're in the ball park? I think some more discussion might be in order.

@Shannon Kiefhaber I can't give you direct experience from owning one but I can tell you from evaluating several that you have to be extremely careful with evaluating DG stores. They are a fairly cheap to build metal building with minimal land costs meaning they can easily jump locations and from what I have seen they have absolutely no problem with moving over one lot and rebuilding at the end of the lease. 

It sounds like this is a longer-term lease and if you can get your money back and a good return in that time maybe this is okay. But from where I'm sitting, there are way better and less risky investments for 6.3%.

Just my opinion.

@Seth Lacey I prefer the Southeast or Southwest as I think most sane people are moving away from bad weather, too much regulation, and too much taxation. But if you have a good deal to back up the magazine gurus (does anyone read magazines anymore?) please send it my way.

@Account Closed  You asked "If I am able to source deals through a sound brokerage network and am looking to get to deals of relative scale faster (raising between $1.5m to $2m in equity capital at an 8% hurdle), where is the best place to find people interested in investing in a new GP with limited to no "street credit"? 

As an investor in these type of deals, i'd tell you that my email inbox is filled with the same brokerage network sending me deals. 

My question to you would be what advantage you offer to me.

I'm fine with paying people for their skills, experience or network. But if you want people to invest with you for no particular advantage I'm not sure how to help with that. Show me you can make money and then we'll talk.

@Britt Mauriss commercial financing is usually 100-200 basis points higher. So if you can get a 4.5% conventional mortgage it will be 5.5-6.0% as a commercial loan. But the larger issue is amortization period. Conventional residential loans are 30 years whereas most commercial loans will be 20 or even 15 years. 

Play with the PMT function and other formulas in excel for awhile and you will see why this makes such a difference. As an extreme example to prove my point, lets say you borrow $1 million on a property producing $10,000 in monthly gross rent with the following terms:

conventional  residential- 4.5% for 30 years: monthly payment = $5067

commercial 6.5% for 15 years: monthly payment = $8,711

Keep in mind, this property, even in a modestly expensive state has taxes of 10% and insurance at 5%. So your minimum expenses, even with no repairs, capex or vacancy is $1500/month.

So best case you are -$211/month cash flow if you don't experience any maintenance, capex or vacancy expenses with the commercial loan.

To be fair, you are building WAY more equity with the shorter commercial loan. But that makes no difference if you lose the property because you can't make the payments in the short-term.

This is an extreme example just to prove the point. These days there are other options such as 30-year amortizing portfolio loans.

My overall point is just you need to hunt for the best financing rate and terms possible and take full advantage of it.

@Phil C. in my area people seem to just dump big piles of rocks to deny access. This isn't against any codes to my knowledge except it's hard to maintain the grass/vegetation around it which is a violation if it gets too high.  But to me this is a an out-dated, low-tech answer to the problem. 

Get some security cameras from a company like simpli-safe and post them so you catch any cars with the license plates coming in and out. Post a bunch of signs saying no trespassing/video surveillance in progress. Also, call the police and let them know about the issue and ask if they will step up patrols in the area.

For a lower cost solution just post the signs :)

@Michael Breedlove great advice here already. I'd second the 'meet with a commercial lender' and 'driving for dollars, knocking on doors and direct marketing comments'.

A couple additional thoughts.

First, even though I appreciate the ambition , there is also nothing wrong with going slow. The market has been growing for quite awhile now and there's nothing wrong with biding your time, learning your market awhile until the next downturn happens. That's the time to get aggressive and grow quickly.

Also, keep in mind that your very best financing will occur on your first 10 1-4 unit properties because the interest rate and terms will be most favorable. Commercial financing has higher interest rates and shorter terms with balloons.

If I were to start over today, the first 10 properties I would buy would be 10 4-plexes with conventional loans.

You asked about owner financing. It is really not as common as it is sometimes portrayed. But, it is a great way to grow and is actually a win-win for certain sellers. You can find, target and market to those individuals by identifying a group using listsource.com or something similar.

You're looking for high equity sellers that have owned the property a long time and preferably live out of state.

@Kurt D. my wife is a physician and she was part of a large physician group at one time that did a similar thing, develop their own properties and then rent them back to themselves. She wasn't with them long enough to participate but if she was I would have jumped right on it. Long-term, stable, occupied medical space is very valuable, much more than the cost to develop it. 

In the case of the company she worked for, they sold it for a very nice profit to a REIT a couple of years ago.

In a way it's like McDonald's in that you can make very nice money operating the business but it gets even better when you add in the profits from the real estate. Not to mention the tax advantages they should pass on to you if you can use them.

IMHO you will not find a better investment for your money.

@Keenan Smith Do you have decent credit and a down-payment? If so PM me and I'll pass along a few commercial lenders here in Rome you can talk to.

@Julio Puentes have you had any local commercial brokers look at the space? Even if you don't want to sell (which it sounds like you don't) you can learn a whole lot from them about what type of tenants are looking for space in the area. If you don't know any, you can find some by looking at similar properties in the area and calling the people on the leasing or for sale signs.

Also, take this for what it's worth because this is just my opinion, but don't try starting a business just because you have space to do so. Recipe for disaster. If you want to start a business, find something you love to do and find the right space for it whether it's your space or not.