All Forum Posts by: Jonathan R McLaughlin

harder to get a "typical" residential loan as an LLC,

Its a pretty quick process and the exact amount of cost will depend on the state filing fee etc. 

@Benjamin Aaker  estimate on cost sounds right

find a property first. You don't need one to buy, and if you want one its quick to do. Tail wagging dog to do in advance.

Yes to @Steve K. Someone is growing something, especially since they are paying the bill. Have you seen a water bill recently? I would check it out. Smoking pot is 1 thing and honestly you will have a tough time enforcing it even if in your lease, but growing is something else. Did you check upstairs or basement or non-public rooms? 

Schedule an inspection to go through the whole heating system Don't ask what time is convenient, give them a time in the near future. See what excuse they give you. 

you can get all kind of answers here but for starters:

most commercial loans at least 25% down

expect amortizations over 20 or 25 years

most commercial loans are tied to an index + spread and have a reset after or balloon (all paid) a set period of time, your rate will depend on the period 5, 7, 10 year. Take a look at the federal home loan bank rate table. Banks will put a "spread" on top of that to get their rate. 

A 4.67 5 year rate (loan either resets or balloons in 5 years) with a 2.50 spread will give you a rate of 7.17%

Most banks will want a debt coverage ratio of 1.2 or above

Debt strategy and refi issues, along with large cash positions and exchanges are common. At $750K, you are in a lower number commercial property, so expect a little more residential flavor but the above should give you a general idea.

Also: You will NEVER read a seller provided pro-forma that is accurate. Do they inclued capex reserve in the CAP rate/NOI? Property managment? Whats the vacancy rate they are using? Current or projected rents? Etc.

Hope this helps.

Great question. Definitely talk to a few brokers who can give you the lay of the land, and you may well wind up going with one of them, especially for a vanilla deal,  but for the local banks:

go in, find a commercial loan officer, take em to coffee and ask their advice. Have your finances laid out in a professional-esque format—

Ask about their underwriting process, what kind of lending they are looking for right now. You can ask about rate but it shouldn’t be a major talking point. Maybe have in your pocket the examples of a couple of deals you could have done. 

It's ok to be new, but have your {*##!€ together. Do you have relationships with contractors? Let them know. You'll come out of these conversations with actual parameters of what they will lend on LTV etc and be able to model stuff better. You can probably get the actual numbers just on a website, but this will be a more robust picture.

When you find a bank you like see if you can put some funds on deposit there.

@Kevin Truong I think what is triggering a bunch of us is your descriptions of "miscelleaneous expenses" and "still need to minus out the expenses"-you are using very casual language to describe what is really the heart of the deal. Same with your remarks on financing. You may know all this, but its not coming across.

Pre approval--worthless if not attached to a particular property. Have you filled out a personal financial statement? Do you have a bank willing to loan to you as operator? With commercial loans its a lot more involved. Fixed, short term or long term interest rate reset? IO or amortizing? Cap rate and liquidity of surrounding properties?

Expenses--far from miscellaneous you need to anticipate potential BIG issues. You can find more thorough takes on this everywhere on this board, but just quickly:

vacancy, leasing expenses, property management, garbage, ongoing maintenance, big capital expenses to HVAC, sewer, roof, window replacement, possible sprinkler upgrades, tax changes (is the 7200 on current valuation? How does the town reasess? , lawn care, snow removal, town rental fees/regs. You say insurance will be 6K a year--what kind of insurance? Whats the replacement value

Few wholesalers are knowledgeable, fewer are honest, and still less are well connected. How did this guy come up with this "deal" which sure reads like its simply being conventionally marketed away from MLS, and is not necessarily any kind of bargain.

Good luck, feel free to show us what you are calculating.

Whatever you do, do NOT stop the process of eviction/non-renewal during those 60 days, or I guarantee you they will still be there. You can be polite, you can be sympathetic, but do not stop. They still haven't paid you anything have they?

If this is a "professional tenant" (ie someone who knows and is willing to work the system to their advantage) they may be able to gain some wiggle room by claiming confusion over the change of ownership. They don't actually owe you any of the past due amount as the new owner I don't think (lawyer!)

I am sorry for your Mom. If she has passed has the estate been probated? What does it mean she gave it to you? Are you acting on her behalf or as the new owner? Is there documentation? You can only collect rent if you actually own it.

You can't afford NOT to get a lawyer here I think. If you are going to sell, you can pay them out of proceeds of the sale if cash flow is an issue

@Jorge Liang do NOT turn it off. Two separate issues: 1) getting tenant to pay whats owed and 2) switiching the bills.

1) court and collection followed by eviction process starting. Don't see how you avoid that if they are refusing to pay. 

But, April 22? Who has been paying the bills? Does the tenant even realize they should be paying? Why have you let this go and did you just discover it? Do they have the ability to pay this? You might be stuck with this bill for a long time even if you get a judgement.

You may actually have some trouble enforcing this given a year plus of this practice. Could the tenant reasonably claim they thought "all utilities" were just what they were paying (heat?) since they never got a bill? Does your lease say utilities must be put in the tenants name?

Certainly I wouldn't renew, and would alter your process so that they don't get the keys until they switch. Hate to suggest it, but if you offer some kind of break on whats owed to get them to switch you may be ahead of the game, especially if you don't think they are collectable. They would have to be fairly stupid to do that if they are intent on skating though....

ouch, following. Surprised. Sorry not to have helpful advice but very curious to hear how this resolves.

I would pay attention to the FEMA flood zone maps that are updated pretty regularly...models only and models can be flawed, but those are the models' insurance companies use to determine their risk and therefore their rates. Same with NOAA weather pattern predictions. So you can quantify your potential cost increase. We passed on one property in Gloucester, MA that was on a low lying part of a major road near the harbor...10 feet of elevation above high tide seemed to be asking for trouble in storm surges, etc.

Certainly, anything in or near a flood zone should get a closer look. Lots of potential/current practical issues if you are right on the waterfront. Maybe pay more attention to new building codes in heavy weather areas and update instead of relying on grandfathering?

Beyond that? Eh...live your real estate life.

a legit company will have a contract for you to review, as well as a track record/references. You should produce your own lease but see whats in theirs. 

Outline anything in your lease thats important. Companies have far fewer protections than individuals so put whatever in there you need in terms of deposits, security anything. What is their assumption of responsibility? Type of occupation and amount of tenant turnover might matter to HOA etc. How many people are we likely to be talking? Who takes care of the place in the 2-4 months its vacant?

I'd be excited. Go forward, but be thorough.