All Forum Posts by: Luke Sass

@Justin Scott I personally love rentometer to give me a quick dirty estimate on what the property might rent for. I also look for comps on local management websites to see what they are renting units for. You usually can compare some of the unit pictures to see if you think that your property will rent for more or less.

@Keith Linne

One more question when calculating your DSC what sort of occupancy are you using in math?It’s nice to stress test your assumptions and drop your occupancy to 85-90% and see what that looks like as a worst case scenario.

As far as the 80/20 or 75/25 it’s probably a lender specific question as I always err on the conservative side and avoid any surprises. The month to month leases might concern the bank and depending on the condition of the building and your remodel you will have to underwrite for some capital reserves ( maybe 2-3% of gross revenue)

@Keith Linne

A couple quick questions for you,

- you mentioned that you wanted to raise rents more in line with market after you turn the units, are the units currently leased ( is the property stabilized?)

- How did you come up with your ARV? With commercial the value is driven by your NOI so depending on local cap rate $290,000 in added value would be an increase in your net income of $70-80 per unit/month.

- When your running your numbers there’s one critical covenant that will throw a wrench into your plans, watch your debt service coverage ratio (typically banks are going to look for 1.20 to 1.25). If your building won’t support that then you need contribute additional capital to buy down your principal until it works.

-You mentioned 80/20 on your refinance, you could find that a bank will only go 75/25 for you depending on your DSC

-here’s a quick link, the first one I could find that speaks to DSC and how to calculate it

http://www.crefcoa.com/calculate-debt-servie-coverage-ratio.html

@Joe Blow I would Eliminate that gray area that typically comes with those type of arrangements. Outline some clear expectations and then pay him for those duties and make him pay rent. He might be a good tenant but a horrible manager it’s nice to separate the two.

@Snehann Kapnadak Snehann, I think that’s an innovative strategy as long as it’s structured properly. I would approach property managers with the following line as its sure to get their attention. “Hi, my name is Snehann, would you like to eat what you kill?” I love that line of yours! you will find out quickly who has a good sense of humor and once you add context it will make sense.

@Patrick Jung Depends if you looking to scale then invest, if your happy with where your at then pay down your principal to guarantee a return by saving the future debt service.

@Melonie Dickson It’s probably the reality of your market, and your agent is giving you honest advice on what it takes to win a bid in a competitive market. That being said the best deal is no deal at all. Unless you have a construction background, I wouldn’t waive the inspection contingency on your first deal.

Hey Guys, I’m in the process of digging into a new market, wondering if anyone has a commercial broker they would recommend in the Madison Wisconsin area. Thanks in advance Luke

@Engelo Rumora Agreed leverage is an excellent tool when used responsibly.

@Michael Patras Great point as it is about people’s goals as well as individual risk tolerance