All Forum Posts by: Marshall Downs

Hello Wendell,

This is not exactly a fix and flip, but what about the deal below on a 24 month term with a take out loan behind it. I copied this from an earlier post of mine.

I'm looking for investment partners for a distressed condo conversion project. Subject property was formerly a public school that was purchased by a developer in 05/06. Construction began but only completed 2 of 22 units. One unit is sold, other completed unit included in purchase. 3 more units framed, rough MEP's. New windows throughout building. Have local bank interest to lend with viable investment partners. Have existing Condo Docs, Expired but renewable PUD, Prints for building and 5 units. My figures are as follows:

Square Footage: 35,000
Units: 20
Acquisition: $350K
Soft Costs: $152K
Hard Costs: $1,546,750 (includes 12.5% contingency)
Holding Costs: $153,250
Project Total: $2,202,000
Unit Sale Price: $152,500 x 20 = $3,050,000 (conservative)

I have this structured to raise acquisition cost ($350K) and bank will invest $750K for rehab. Sales will fund remaining rehab. 2 year project with strong ROI on backside.

I have construction and project management experience and have completed similar projects. Good relationships with local govermental authorities as well.

Thanks for checking out the post and I look forward to hearing from the BP community!

@Craig Rismiller

@Craig Rismiller in the hopes that they would be interested in lending on the end. They let me know that it would be more challenging to sell these loans until we reach 60% capacity, but that they would be interested in offering a portfolio product to qualified buyers to mitigate that concern. Of course, they don't want to be the only institution in the mix, but it helps.

As far as rental goes, the numbers are just better than break even. I ran this project both ways to confirm it would cash flow and it does, but it definitely isn't a straight rental project. Some blend of sales and rental would work for awhile.

Hello All,

I'm looking for investment partners for a distressed condo conversion project. Subject property was formerly a public school that was purchased by a developer in 05/06. Construction began but only completed 2 of 22 units. One unit is sold, other completed unit included in purchase. 3 more units framed, rough MEP's. New windows throughout building. Have local bank interest to lend with viable investment partners. Have existing Condo Docs, Expired but renewable PUD, Prints for building and 5 units. My figures are as follows:

Square Footage: 35,000
Units: 20
Acquisition: $350K
Soft Costs: $152K
Hard Costs: $1,546,750 (includes 12.5% contingency)
Holding Costs: $153,250
Project Total: $2,202,000
Unit Sale Price: $152,500 x 20 = $3,050,000 (conservative)

I have this structured to raise acquisition cost ($350K) and bank will invest $750K for rehab. Sales will fund remaining rehab. 2 year project with strong ROI on backside.

I have construction and project management experience and have completed similar projects. Good relationships with local govermental authorities as well.

Thanks for checking out the post and I look forward to hearing from the BP community!

Yiv,

Unfortunately I have had my share of inherited tenants, illegal move in of a friend after another tenant moved and tenants having someone "stay" on a temporary basis then acquiring the visitor as a permanent tenant. Here us what I do. If I would not have rented to them I immediately serve them a 30 day eviction that has nothing to do with rent payment (can't remember the name of the document now, maybe notice to quit). If I would consider them as a renter, I have them fill out an application with a fee for the credit/background check and if ok, create a lease with them. Of course you have to follow all fair housing laws, etc. But, I can tell you that when I have just let someone stay it has cost me dearly. A trashed unit is far more expensive than the cost of many months rent in my market.

Ahhh, the good old days. I'll drink to that!

I have the same question Anthony. Does it help/hurt to have the license? I was considering getting my brokers license ( MI requirement is 3 yrs in RE and Builders Lic. counts towards that) but not sure if it can negatively affect my investment business. For example, if I am not bound by a law regulating the industry is it better for me?

Chris, not sure how delinquent taxes accrue in WI, but here in MI it adds up to the tune of about 50% when factoring in penalties, interest and fees. Not many traditional investment vehicles where you can get that return. Sounds like an excuse to me, but without knowing your laws, not certain.

@chanteowens you could aim for seller financing. Have the seller hold some or all of the note to get into the property and chances are the other issues will not factor in. I bought my second property this way. Put 4k down and agreed upon price, rate and duration and none of that stuff ever came up. If you are really ambitious, you can try to get in without anything down, but as with any investment just make sure the property cash flows from day 1. I have seen people become so enamored with the prospect of controlling a property without any down and forgot it has to make money...unless you have a short term exit.

Welcome Jake. Newer myself but always good to have some SW Michigan folks on BP.

@Account Closed

I would manage this unit now while you don't have many to keep track of so you can gain a quality understanding of the industry. Tenants are fickle folks and as the property owner, you will need some time to learn the best way to handle that relationship suited to your style. Learn all you can early on and set up systems that make your life easier so by the time you have enough properties to go full time, you are a pro.