All Forum Posts by: Kathy Henley

@Davd Stanton You sound wonderfully skilled!! Find a partner who has what you lack: financing.  I have money but no rehab skills.  Offer to share a project with another investor.  Start taking agents, property managers and investors to lunch.  Make connections at local real estate investment clubs. You need names and introductions.

Your future looks bright.

@Diego Murray  Real estate is local. What are investors willing to pay for your finds? Try joining a real estate group in your area so that you can learn what the successful deals look like. Make connections, listen and learn. It is too early to project your fees. 

@Justin Godlewski Yes, get comfortable disappointing the list price; one cannot loose money on a deal to be successful.

Ignore the list price and offer what you think it is worth, this takes practice.  Start your bid on what you do know. Submit the offer along with the list of repairs and the out of pocket  costs of getting it rent ready, along with an inspection clause.  I have had to walk away from properties for the issues that I did not know, but were uncovered in the due diligence phase.

@Tim Griffiths  In general,  mixed use buildings are terrific!  One gets the solid base from the commercial tenants and the ever-rising rents from the residential tenants.

Do not focus on one expense, like insurance, your tenants are going to help pay. Commercial tenants will have their own policy, even loss-of-income if it is required by the lease.  This shares the burden with what coverage you need, as the property owner. Talk with an insurance broker.  Brokers will guide you to who covers your type of property, at the best price.  But first, determine a current value for the property.

Skip the assessed value, you want to know what value it is today and where you can go with it over the next few years.  Commercial real estate is measured by the rentable square feet, residential by monthly market rents.  Value each portion and add them together.  Send a letter of intent and ask for the actual monthly expense reports and leases.  Base your offer on actuals.  What are you willing to pay for it and get the return that you need to make it work.

Read the current leases in the commercial units and find out who pays for repairs and maintenance. How strong are the leases, 1yr? any options?  What are the market rents for the residential?  Is there room for improvement? Talk with a commercial leasing agent.  What better tenants could be found for your 2 commercial units?  

@David Clay I didn't see the rent rates in you summary. Rents & leases are what give a commercial property value.  The residential units will have a monthly rates set by local markets.  The leases on the commercial space specify a tenants obligation to insurance, the common area maintenance and building repair.  Commercial space us rented by the square foot, for ease of discussion.  In such a small town, you may be your own leasing agent.

When my employers buy a warehouse, they do repairs and freshen it up to be vanilla ready.  The commercial tenant will negotiate the build out according to their business needs.  

Meanwhile, you will have those monthly payments due.  The money clock will tick until you have a signed lease for a tenant.  Write up a expense plan on where you are going, how long it will take to get there, how long you can go before you anticipate finding a tenant?  What level of rents do you need to break even?  Write up a business plan.  This will be the start of determining you offer price.  Ignore what the owner is asking.  Offer what it is worth to you to make it happen.

What gives you the idea that the central area is on the rise?  Talk to people.  Talk to artists.  Start your marketing research today.

We qualified for our 4th investment property loan as individuals.  The 4-plex that we want to buy also qualified for a commercial loan, under the name of our LLC. Isn't this what we have been working towards? The terms on the residential loan are 4.625%interest, fixed, amortized over 30 years. The commercial is 20 yrs./ 4.12% fixed for 2 years, then balloon or renewed at the rate of the day in 2019.  Which is better?  We could use either lender on the property that we have under contract.  The building needs repairs.

The cash flow is better by $110/mo with the 30 yr am. So the return is better, obviously. It is the detail about the LLC that has significance. Is there an advantage of having debt as a company. On our next loan application as individuals, will we need to mention the commercial loan?

@Rosston Smith  It came out in the face to face negotiation.  He knew he was in violation and needed to leave (3 day notice was served.)  I offered '$300 cash if he could turn the key in to the property management office by Friday'.  He asked for another weekend.  I asked him what he needed to make it happen.  He said that he needed a way to move his boxes.  It came down to the u-haul arrangement.

@Rosston Smith  One wanted cash to rent a u-haul.  I made it happen.  

@Rick Wang

There is a book that you should read this weekend: Start Your Own Corporation, by Garret Sutton. It will give you the answers.

@Kevin Stein  There is a book that you should read this weekend: Start Your Own Corporation, by Garret Sutton. It will give you the answers.