All Forum Posts by: Joe Young

Quote from @Chris Seveney:

Quote from @Joe Young:

The last few years we have been flipping, renting, worked into small commercial…

We were approached by a high net worth individual who owns appx $100 mil in debt free real estate and has tons of un-invested cash. He’s getting older and wants “foot soldiers” to lock him up some small apartment buildings and small bay warehouse for him to hold… and in exchange give us a multi-million dollar “credit line” for our flip business, our intentions are to build more capital to invest along side him. 

He offered to fund any deals we find with cash and his credentials  - so basically if we lock up a $4 mil property he will cover the down payment and help qualify the loan..

What is the “industry standard” return and equity split on a partnership like this?..  He wants us to build wealth and retain equity as we are “bringing the loan”, but he is bringing the cash.  Cashflow is our goal, he just wants appreciation and doesn’t necessarily want a check every month.  

 Have you done any research on this person? I find it suspect that someone with $100M would be soliciting random people for this. 

We aren’t random people.  Personally known.  

The last few years we have been flipping, renting, worked into small commercial…

We were approached by a high net worth individual who owns appx $100 mil in debt free real estate and has tons of un-invested cash. He’s getting older and wants “foot soldiers” to lock him up some small apartment buildings and small bay warehouse for him to hold… and in exchange give us a multi-million dollar “credit line” for our flip business, our intentions are to build more capital to invest along side him. 

He offered to fund any deals we find with cash and his credentials  - so basically if we lock up a $4 mil property he will cover the down payment and help qualify the loan..

What is the “industry standard” return and equity split on a partnership like this?..  He wants us to build wealth and retain equity as we are “bringing the loan”, but he is bringing the cash.  Cashflow is our goal, he just wants appreciation and doesn’t necessarily want a check every month.  

Terrible service - save your money.   I paid extra for exclusive leads, and the people are being contacted by 30 to 40 investors.  More of a scam than anything.

Thanks for reply.  Don’t most private investors want to lien the property?  And / or the bank want to know where the funds came from?  I had a private lender offer down payment for 12 months on a commercial building, but they wanted 2md position lien at closing (same as I would want) and the bank wasn’t keen on seeing another lien at closing 

since selling my primary and using profits to invest… we’ve acquired (since sold) a few rentals, done a dozen flips, and bought commercial properties all in the last year.  I have used hard money loans mixed with my own funds.  

After gaining experience, I want to use other peoples money for all my deals.  MAINLY down payments… I don’t mind using my cash short term, but how do I structure private money for down payments?  I have used a lender that was ok with 2nd position, but those are few and far between… but also - the banks don’t like that I’m borrowing money from them, and also borrowing the money for the down payment.. 

again, I have the funds, about $1 mil cash… but I want to leave that available for quick home run purchases, and operating funds.  I understand I need to have skin in the game, but very hard to scale when you have cash sitting in long term holds. 

Quote from @Ronald Rohde:

Quote from @Joe Young:

Quote from @Teri Feeney Styers:

Write two documents with the tenant who wants to purchase. The first is a lease with a monthly rent of $5500 or more (which is what the other people offered you). This lets them get into the building and start creating a financial track record. The second document is a purchase contract. Make the closing date work for both obtaining an SBA loan AND meeting 1031 guidelines. This will give you monthly income now, time to watch the local market and loosly identify a replacement property if that is your goal. Possible downsides? The tenant doesn't get their SBA loan and they just stay your tenant - you have a lease in place. The other possible downside is that the purchase transaction takes place and you are unable to find an appropriate replacement in time. In which case you pay the tax you were willing to pay today. 

I actually wrote up a lease option yesterday.. and a purchase contract.  Have them 90 days to get approved and 6 months to close at $800k… my request was they move in on the 1st and give me first and security.  I guess we either close or I have a tenant good either way 

 They signed? What legal form did you use? 

Not yet, waiting on their lender to get back from out of town Monday to provide pre-approval and discuss their ability to close.  I used basic lease / lease option docs to go over details with them, but ultimately will have my title company / attorney write it up for signing 

Quote from @Teri Feeney Styers:

Write two documents with the tenant who wants to purchase. The first is a lease with a monthly rent of $5500 or more (which is what the other people offered you). This lets them get into the building and start creating a financial track record. The second document is a purchase contract. Make the closing date work for both obtaining an SBA loan AND meeting 1031 guidelines. This will give you monthly income now, time to watch the local market and loosly identify a replacement property if that is your goal. Possible downsides? The tenant doesn't get their SBA loan and they just stay your tenant - you have a lease in place. The other possible downside is that the purchase transaction takes place and you are unable to find an appropriate replacement in time. In which case you pay the tax you were willing to pay today. 

I actually wrote up a lease option yesterday.. and a purchase contract.  Have them 90 days to get approved and 6 months to close at $800k… my request was they move in on the 1st and give me first and security.  I guess we either close or I have a tenant good either way 

Quote from @Henry Clark:

Couple options

1.  Do an SBA refi yourself down to 10%.   I like this because it is fixed. But you can only cross collateralize with another SBA deal. In your business model I wouldn’t.

2.  In your shoes.  I would keep to start adding Passive income.  Flips can get old and also be hard to find.  Use this to level out your income stream.  That’s a good stable neighborhood

3.  The $800k offer sounds great and is, but I don’t think it’s that great a deal if you went to find or build a similar location.  If you did that I would come back at them with $600k up front and $400k over 5 years.  I would make that offer anyway versus just saying no.  

4.  Lease option, you didn’t ask but I will throw in.  Any changes they do stay.   Car lifts, hvac etc. you don’t want to have to plug holes if they leave.  Also put in a 6 month notice to move out of the lease at the end.  With predefined rate increases.

5.  How much parking and land go with this?  If a lot, segregate and lease that out to this person or others.  See if there is cheap land or run down buildings and add to your property to value add. 

Use this property to level out your income stream.  Also as a base for cross collateralization.   Great deal. 

 Replacement would be tough but I’d have 400 cash reinvest.  For an sba I thought I had to occupy?

One plan was sell, use the 400 as 10% down on multi-tennant new construction.  My small business can use one unit and have 8-10 other small bay to rent out.

I have done a about a dozen residential flips this last year, some I intended to hold but due to market (Tampa suburbs) prices rose fast and I had a chance to get out of some class C / D properties with some good profit.  I used my profits to buy my first commercial building and promised myself I wouldn't sell, as I want to build wealth and not just be flipper.  However, one of my potential tenants made an offer on the property to purchase!  Here are the details.

Purchased 6000 sqft warehouse / automotive shop for $515,000.  Invested $15,000 into paint, facade and some repairs. 

Purchased 120 days ago on a 20-year note, 25% down ($138,000) and no balloon 6.7% fixed interest.  My total monthly expense is $4250 per month. 

The potential tenant offered to buy for $800,000 with no brokers on either side and splitting closing costs.  It's an SBA loan so the 4-5 months it will take to close put it really close to being 1031 eligible although I don't mind just paying the tax now.

Another potential tenant is ready to sign a lease for $6500 a month gross NNN, so about $5500 rent and $1000 is for taxes and insurance. They asked for a 5 year lease with 5 year option so plan to stay.

My thoughts:  the building is in a decent little town (Port Richey).  A little older building in a lower income neighborhood but a decent spot.  Not necessarily in the path of progress as most of the immediate area has been built out already.  The building will need a roof in the next 10 years and insurance in high due to age. 

Leasing it offers a great cash on cash return of 20%, but when I calculate my return on equity and cash is only about 6.8%
Part of me wants to sell and invest into a newer multi-tenant building and the other part wants to take my home run deal and set it and forget it.  Any advice!??  Last option is at the 6 month mark refinance my down payment out and have no money in the deal.. The lender also offered to allow me to cross collateralize after 6 months so I can access the funds to use as a downpayment on the next one, just makes me nervous maxing out debt on a single tenant building. 

 

I’m actively investing in new port Richey, holiday etc.  trying to buy 25 sfh or small multi doors to hold this year - and need some flips to keep the $ flowing.  Just started direct to seller marketing but I’m open to have an agent assist / earn the sellers agent role on the flips.  I’ll DM you!