All Forum Posts by: Cornell M. Dayne

This property is a heavy industrial warehouse and office space. Again motivation is there. The Building and trucking parking lot is partially leased with a lot of the leases being to smaller local companies (hard to get info on them) with leases set to expire in the near term, ie 6 months and 1 year. Some of the lease are longer term ie 3 years.

By the way the building is NNN along with CAM charges. There are also some other opportunities to boost income since the owner uses parts of the building for itself and the building is not fully leased.

The Office portion makes $209,000 per annum.
The manufacturing/trucking portion makes $322,000 per annum.

The thing that bothers me about this deal are the uncertain, shaky leases. I would not want to get in there and find out that the owner just put a bunch of companies in there that couldn't pay rent. One tidbit I forgot is that the owners purchased the property vacant.

The owners are amenable to selling the office building by itself and vice versa.

How would you guys approach a deal like this?

Is there anything missing in my analysis?

**The loan is assumable by the way

I am leaning toward a short term master lease (18-30 months) because I want to get in there and stabilize the property with no risk to myself. I also doubt that the bank will like the fact that the lease albeit NNN are short term leases.

What would you do and how would you analyze it?

I have found a couple of commercial properties in which the owners are extremely motivated.

The first one is small C-class mixed use property in an A-class area in a small town. The company is fairly complex (could be an advantage for me in the negotiation). It has 4 uses: 1) 11 residential/apt, 2) 40 self-storage units 3) Retail storefront 4) Automotive garage.

All gross leases.

The owner hasn't kept good records so there aren't any tax returns for the last 3-4 years (another advantage possibly). The proforma NOI looks like it would come out to be about $90,000 per annum. I estimate that its probably closer to $80,000 at the moment especially since the owner manages the property himself and I would need to pay someone to manage the property for me. I also expect a little bit of turnover after the purchase.

Since I typically like the spread between current interest rates and my CAP to be a minimum of 2 points. I would be looking for AT LEAST a 9 cap in valuing this property since I expect the bank to charge me 7%. But a 10 cap would probably be my sweet spot. The complexity of this property is also good reason to look for the higher cap.

My question is what would you all do to set the deal up?

Would you go 2 year master lease stabilize the property and then cash the owner out/sell?

Would you make a cash offer just to see if you could get it?

Would you ask the owner to carry some of the financing like say 15-20%?

Would you value it differently than I did?

What would you do?

I will put the second property up in a second thread.

It's interesting because I been thinking about starting a blog.

I agree with Reggie. Blogs are great for driving traffic to your website and also great for showcasing your knowledge of you local real estate market.

Do both.

Sniper,

I actually think that you are on to something. One of the things that we as real estate investors hope for most is referral business. And I think that by branding your name with a certain color scheme or logo or slogan can actually lend strength to the number of referrals that you get each year. In addition, if you think about it, it can also contribute quite a bit of credibility to your business and in the long run create a formidable veneer that both commands respect in your area and quite possibly shatters pesky objections.

The goal is to test. Try it and see if it works for you.

Furthermore, sometimes when we do what our competition isn't doing, we, effectively, stand out from the herd. And this can be an awesome advantage.

If I find a value-add type of deal below market, and in 6-8 months after the purchase I manage to remodel the building, raise rents, and shrink expenses.

How easy is it for the appraiser to step in and appraise it for a higher value? I guess my hang up is tied to the fact that when purchasing a property the buyer and the lender wants to see a solid history of rents of 3 years or more.

Why is the lender so much more lenient for a refinance since the rental history at that point would only be 3-6 months old?

I've been told that letters aren't the most effective way to contact owners of large apt. complexes.

Supposedly, the best way to get into the loop and have the first crack at purchasing larger multi-family properties before they hit the market is to (1) network with commercial real estate professionals such as Scott the CCIM (2) join commercial real estate organizations such as the IREM, BOMA, NAA, and ICSC or befriend individuals that are members (3) approach a property owner in the flesh and (4) network some more.

You agree Scott?

Dig your well before you're thirsty?

Any thoughts?

Has anyone sent out a generic message to a specifically targeted list?

Has it worked?

Would you recommend it?

Did it hurt your capture rate?

Anyone?

Well, suppose you were farming tax liens in your local area.

And you knew that if you sent a postcard specifically talking about tax liens to that list that you just developed, many of the folks would get pissed off, curse your family, and never ever think about allowing you to help them solve their problems.

You are also aware that letters are an expensive endeavor, both financially and time wise, as you have developed a pretty sizable list of prospects.

So to beat the cost...

And play dumb as I said earlier...

Do you think it would work to send the folks on this tax liens list a general postcard about your company selling the possibility of them cashing out?

The postcard could hypnotically suggest that there is a greater problem that you can solve, but it will not directly implicate them as having a problem, as they have been chosen randomly due to the fact that they have property.

The advantage to you would be the cost, and since your belt is not quite as tight anymore you could spend more cash to get in front of more eyes.

And because the postcard is general, it would not exactly alert the mail carrier of their current financial conundrum, that they may (or may not "wink wink") be dealing with.

You both have given me a lot to think about.

Wheatie: that was just the "out of the box" thinking that I was hoping for.

Gainsvillej: you injected a bit of caution on behalf of the argument, which was awesome.

My question to you both is based on the suggestions that you both made, is there anything that you've seen work better & are there any options that you have yet to think of or mention.

Wheatie you're right. I will contact my lawyer ASAP. But you both have prepared me for the conversation that I would have with her. Saved me some hourly moola! LOL

Have a good day guys!

Hi everyone!

Hopefully, this post finds you all in good health in good spirits.

My question is as follows:

What does an investor have to do in order to pool the funds of individuals without having to represent/secure each individual interest as an individual lien against the property?

For example, if I purchased an industrial warehouse that sold widgets and the value that we derived for the property was $2,000,000 and I then managed to raise $400,000 from a total of 20 folks who were solely interested in a debt partnership with my company. How could I go about securing their investment and/or pooling their funds without creating 20 lien positions on the property.

I've heard that it is very unattractive to be in a lien position greater than 3.

Thank you all in advance for you wisdom and advice.