All Forum Posts by: Michael K.

Hi BP community - any idea on how to pull out cash on the following deal, short of selling it or a full refinance of the property with a new first mortgage?

Looking for a commercial "HELOC" or second mortgage or perhaps private money? What could I expect the rates to be and what banks might do these types of loans?

Rough property value - $1.1 million

Current seller mortgage on the property in the amount of $550k

Looking to increase LTV to around 80%

Thanks,

Michael

 Brian - thanks for your post. If you allocate all of the property's depreciation to the Investor, then where does that leave you? Any money earned from your % ownership of the money means you have to pay higher taxes on it? Rental income and then also with any portion of the gain when you sell? 

Just curious if you have you ever seen a property sell at auction for below the upset/reserve price?
Either by realizing at the auction that the upset price is getting no bids at that level, so they adjust it, or by an after-auction deal with the Lender?

Hi all - just curious how an Investor knows if the house they recently rehabbed can be purchased by a Buyer with FHA financing? Are there certain geographic areas that Buyers cannot use FHA financing to purchase the house? I imagine if your house can be purchased using FHA financing, that would increase the pool of Buyers, and if there are restrictions on who/where FHA financing can be used. Thanks!

Seems like different Investors have different uses for replacement cost in terms of valuing potential investments.
The way I understand it, in general, when replacement cost is above the cost of acquiring an equivalent existing property, you can charge less rent with your existing property acquisition and still achieve the same return as the Developer who must charge a higher rent on his newly-developed building, so you stand a better chance of getting tenants. Therefore, generally speaking, when acquisition cost of existing property is greater than replacement cost, you are better off developing a new building. This all assumes land costs are equal and all else being equal. I know that this also depends on the product-type you are building - class A, B, etc.
What are your thoughts on replacement cost as a measure of evaluating an investment deal?

Also: doesn't necessarily have to be a problem issue. For example, if costs to fix up a facade were greater than anticipated, or to upgrade wiring in the property, etc.

Curious to know if other investors have had experiences where they acquired a property and realized a huge expense that they otherwise did not expect or uncover during due diligence? Or if they knew about the problem, but costs to fix the problem were far greater than what they projected during due diligence? Would be helpful to all of us, if any patterns emerge from these experiences, so as to know what to look out for during due diligence and before closing. Thanks.

J Scott - always a pleasure to get your input. Thanks.

All this winter weather in the Northeast has got me randomly thinking about what snow's effect on a multi-family building are? Is it best to quickly shovel off a flat roof of all the snow accumulated right after the blizzard hits, so as to minimize the amount of new weight on the roof? And also to minimize potential leaks? Moreover, all that snow could eventually freeze and turn to ice which I imagine would be an even heavier load on the roof. What are the precautions and steps before and after a snow storm that you personally take as a property manager or landlord on your properties? Kind of a random question, I know, but I'd be interested to hear other's takes on this.

Thank you both very much for your insight.
J Scott: I am referring to a multi-family property, not a SFH. I like the conservative approach of laying the total figure out in the front of the model as part of the purchase price, with the hope being that the seller is more flexible on the price due to the renovations that need to be made. However, lumping in a large number upfront can also decrease the COC return, which many investors are looking for in the first year or two (of course until your improvements increase the property's top line numbers)
Bryan: I certainly see the validity in approximating the cash outlays over time on a monthly basis against the property's revenue as another approach.
At the end of the day, financial modeling is in many ways an art just as much as it is a science. I guess I will need to tinker with my models using both of your approaches to see the various returns that each approach yields, and perhaps take some sort of average of the two!
Thanks again!