All Forum Posts by: Joshua Fulenwider

Sounds like another tool to use.  But don't count on it.  For years Zillow was horrible on their estimates.  It has improved a lot as their data and algorithms have both improved.  My preferred way to get a good idea of a home value is to look at recently sold properties in the area.  Find those with similar features to establish your own price range regarding certain properties.  This is less accurate than a true sales comparison approach done by an appraiser.  But potentially more accurate than a computer.

To refinance into a traditional mortgage you will most likely need 12 months of seasoning on the rents being generated. That may be difficult to achieve during short term construction financing. However, if your personal income supports this level of mortgage you may be able to get around that rule. I did something similar in Colorado and I had to Quit Claim Deed the property out of my LLC to me personally.

The other option would be to seek commercial financing. LTV at 75% should be acceptable for most. However, you are probably looking at a 20 year term, possibly with a balloon payment. But it can at least get you down the road.

I am surprised your construction lender did not require a take-out letter prior to funding the construction loan.  You may want to talk to them and see what their plans are for it.  Maybe they are hoping to provide the permanent financing.

What is driving the negative trend in the numbers?  Looks like it started strong in 2012 and is now operating at a pretty sizable loss.  What is going to be done to reverse the trend and return this to profitability?

@John Dorma coming from it as a lender I would want to know what vacancy is in other similar strip centers.  If similar properties in similar locations are only 70% occupied that would be the standard I would use and then pad in some extra for any economic downturns.  

Also, physical occupancy may be 100% but is there any economic vacancy?  Meaning is anyone not paying?

I would be hesitant to lend on a strip center with 5 occupants all on month to month unless the new owner could work out a contract subject to tenants signing longer leases (preferably coming due at different times).

Do all 5 tenants pay the same amount and have the same size space?  If they are different and you lose your largest tenant you could be looking at a place that is 4/5 full but only receiving 50% of the revenues.

It would be in your best interest to interview all the tenants once it is under contract and see if they are satisfied or have any plans to move in the future.  Also see how business is going for them.  If one is struggling it may indicate a potential vacancy.  If they are all struggling there may be a deeper problem with the property or the economy in the area that you should look for.

@Tyler Derickson 50% of $450k is a lot more than 100% of $0.  Sounds like a great deal but if you can't take it down yourself you should definitely consider a partner.

That being said, a hard money lender may loan you the whole amount if the project fits their model.  Points and interest may kill it though.

Also, ask around and see if you can get some private financing, maybe even through a hard money lender.  Perhaps someone else would be willing to loan you the remaining funds in 2nd position against the property.  That way you retain your ownership in exchange for the interest given up on the 2nd loan.  I would imagine the points and interest may still be high on this, however because it is much smaller than financing the entire project using hard money it could make it work well for you.

@Abad Marroquin  here are some of my initial thoughts based on the info provided.

• The property taxes may go up with the sale, especially if the price is much higher than the last time it sold.
• Insurance may go up compared to what the seller was paying.
• Management - if you are self managing you may not have this expense.  However, you should plan on it and figure it into your budget in the event that you either decide to hire it out or go to sell it soon and the next buyer wants to hire it out.  Also, if you are self managing this is money that should be coming to you each month just like any other expense.
• Repair reserve - repairs may be on the operating expenses as a line item but how much are you going to need to set aside each month/year for large repairs like the parking lot or roof.
• Once you know the unit rents you should check with other similar properties in the area to see what their rents are.  If yours are above market you may have to adjust them down in the near future to maintain occupancy.  If they are below market you may have an opportunity to raise them and increase your cash flow.

The way I see it, if you can use the HELOC funds to finish unit #4 and then refinance to pay back the HELOC you can then use the funds again as down payment on another property. If you just use it as down payment you are restricting your ability to finish out the 4th unit.

If you can not refinance and get all or most of your cash back following the completion of the 4th unit then I think I would pursue another property.  In this scenario you can complete the 4th unit at a later date when the property would warrant a cash out refinance following the 4th unit's completion.

Hope this makes sense.

Mobile home parks are outside my area of expertise.  I'm trying to build a foundation of knowledge on the subject.  I have experience with other rentals.  What books, blogs, podcasts, or other resources do you recommend?

Thank you in advance!

Congratulations! 

@Account Closed if you are wanting to become a professional appraiser there are multiple schools that you can attend.

If you are just wanting to determine value on your own deals there are a number of ways to get started. What I do is subscribe to various free MLS auto searches based on the types of properties I am interested in (realtor.com for MLS & zillow.com for FSBOs). By reviewing a daily email blast you will be able to start to get a feel for what asking prices are.

You can follow this up by looking up sale prices in county records.  Most counties allow you to do this online.  (The Clerk and Recorder's office Assessor's office keep track of sales and other documents).

Then start talking to people.  Figure out what your market is doing by listening to people (professionals in the field).

These are the best free/cheap recommendations I have off the top of my head.