All Forum Posts by: Kyle Lewis

@Nicholas Novak thanks Nicholas! That's the best option we've found, but what happens at the end of the hard money loan? I'd assume refinance, but don't banks want to see more historical performance than just a couple months of rental income? Is there ever an option to extend the hard money to get more time?

@James Masotti thanks for the suggestions! The $170k does not reflect current NOI and realistic cap rate. The price is based on what the NOI should be, which I understand is very risky, but this is a situation where the current landlord purchased the property without ever seeing it, isn't willing to put any money into the property to update or fix things, and wants out. So the 170k is based on NOI if occupancy were at 80% with below market rents of $400/unit and a cap rate of 11%. Based on rental comps on that street and how poor of condition the units are currently in, we feel confident we could get $600/unit and about 10% vacancy. For the 11 and 12 month loans, what does the borrower do after the 11/12 months? I'd assume refinance, but don't banks want to see more historical performance than just a couple months of rental income?

I have a 12 unit apartment building under contract in Cleveland, OH. The building is vacant because the it has been neglected over the years. This presents a great opportunity for us to buy at a discount, rehab, and rent out at much higher rents. However, because 11 of the units are vacant, most banks are afraid to lend money for the project.

The purchase price is 170k and we estimate it needs 100k in rehab. My partner and I have great credit, income, and liquidity. The best option we've found at this point is hard money for 11 months (70% LTV, 2-3 points origination, and 10% interest) then refinance once the building is stabilized. We'd prefer to get into a loan with better terms. Anyone have any ideas?

Thank you!

Hi @Account Closed, congrats! My (initial) goal is to exceed $10,000 in pre-tax cash flow and you're there! How much did your most recent rehab in your pictures cost? The place looks awesome.

My $0.02 -- tenants are your customers and should be treated well. People remember the thoughtfulness. I have vendors that send me holiday cards, thank you cards, etc. If you can do something that only costs a few dollars, but builds a stronger relationship with you customer/tenant, why not? It could result in them having more respect for the unit, trying harder to pay on time, staying in the unit longer, etc.

I'm purchasing a 5+ unit building for less than 300k and plan to spend about $80,000 in rehab costs. Is this a good loan for me or could I find better?

10 year loan amortized of 25 years @ 5.13%. Line of credit for the $80,000 at prime + 2%

Thank you!

@Chris V. Sorry for the late response! I'm closing on a SFR in the Cleveland, OH area right now. And I agree with the idea of going somewhere that isn't a hot market overrun with investors. Cleveland delivers solid cash flow. We're also about to send an offer on a commercial multi-family in the Cleveland area. It may require frequent trips to Cleveland until each property is stabilized, but the goal would be to get them operating without my direct involvement.

@Enoch Conley sorry for the late response here too! Happy to share. Feel free to PM me and I can make an intro.

@Kenneth Reimer thanks for the input. I'm not suggesting to remove the CapEx reserves from the analysis/P&L entirely, but rather move the CapEx reserves to AFTER the NOI is calculated. Below are calculations showing both methods. The Cash Flow, CoC ROI, and the Total ROI stay the same, but the NOI jumps from $25,348 to $33,988 when CapEx reserves are pulled out after NOI is calculated.

Example where CapEx reserves are included in operating expenses:

Example where CapEx reserves are treated the same way as actual CapEx work would be - after NOI is calculated:

I've used a variety of deal analysis calculators and many of them include CapEx estimates/reserves in the 'Expenses' category, like this:

Income - Expenses (including CapEx estimates) = NOI

But shouldn't CapEx estimates/reserves be factored in after NOI is calculated? Even if this money isn't being spent immediately and is being set aside as reserves for future CapEx work, they will someday go towards CapEx, so I don't think it's accurate to include this as an expense. Shouldn't the calculation be:

Income - Expenses = NOI; NOI - debt service - CapEx = Cash ROI

Is there something I'm missing? This seems like a no brainer to me, but wanted to confirm because a lot of deal analysis calculators seem to have it structured incorrectly. 

Thanks!

It looks like you're in good shape. Even if your rehab budget doubles to $70,000, you'll still be making above a 13% cash ROI. I'd just want to confirm that the rent numbers are accurate and I'd build a worst case scenario where rents don't increase above $480, vacancy is at 20%, and the rehab budget doubles to $70,000. If the numbers still work out (sounds like they would), then I think you're in a good spot.

Congrats and good luck!