All Forum Posts by: Mel Park

@Andrew Kougl

Thanks for the reply.  Regarding maintenance - certainly you might be right, I don't have enough experience to dispute it.  How I came to my forecasts:

$900 yearly repairs (plumber, heating, etc) -  I looked at my (2) townhomes in Virginia;  Over the last 6 years, the average has been $731.00 per unit, per year - this encompassed calling a plumber and an electric guy - each, once per year.

$1100 per year x 10 years holding period = $11,000

*New Appliances: $2,500

*New Water heater: $700

*New A/C unit;     $3,500

*New Furnace:     $2,500

*Repaint interior: $2,500

*New Carpet:        

@Martin Enoghase Be warned this is an utterly useless reply.  I don't have any expertise to give you, and certainly other members have imparted good faith advice, and some good should' ve-would've items that we all can learn from.     In my previous life I owned medium sized businesses - very successful.  My industry had high-turnover of employees but MOST of my people - from people earning 6-figures, to the kid making $14 an hour...most of them stuck with me. Some even re-located to a new state when I sold a company - then bought a new one.   TONS of trust, both ways.   And, in my 25 years of business - I so many times did business on my word, and vice-versa. I relished my reputation where my word was trusted. Anyhow....towards the end - some of my "loyal" people sort of arrived at their goals - be it college paid for, kids married, whatever.  They turned on me. Stopped even trying.  Screwed me over in certain ways.     I learned - I'll always keep my word - BUT from now on, I'll have everything in writing, and I'll ask the most basic nit-picky questions of attorney, property managers, and whomever else I work with in future. 

Anyhow, I just wanted to express my regret that you are going thru this. People who do business on good-faith - can't comprehend when others - don't.   The one intangible I'll offer:  Dig in now. Be prepared - -- for a process.  It'll happen step by step - but it' won't be a snap of the fingers.  Many times - people like that are hoping you'll get bored, you'll move on, you'll make a mistake.     Whether its walks, family, music, food, tennis, whatever it is - make sure you keep your body, mind, and attitude good.  And be patient....step by step this will be a process.   Hang in there.   

Oops, forgot - it's $300 more to ROI due to trash fee. So now it's a 3.49% ROI. I'm Jeff Bezos now.

It's not a home-run.  Yes, leveraging would be a better return - but I'm 46, retired, no W-12 income. Gonna work with a broker to get future mortgages, but for varied reasons I needed to invest some cash.    

Metro Atlanta - Acworth.  3bed/2.5bath townhome. 

Asking Price: 240,000. Purchase Price: $248,000. After closing costs: $251,000 rounded-up. (some of this was HOA dues, property taxes, so not closing fees per say) Needed *nothing* but $100 worth of L.E.D lights.

Property Manager advertised the rental for 2 weeks - we got less applicants then anticipated buy 2 were strong.  Settle one a tenant:   The guy has relocated often, Young 30 something, 2 degrees, working in his degreed-field for 6 years now.   FICO is 850, did (1)landlord reference which came back good.   Property Manager has 70 properties - he felt good about this tenant. Terms of lease:

$1800 per month. + $25 monthly trash removal. (Included in my HOA dues)

*2 year deal - at the end of 12 months, rent goes to $1,900.   1st month+  $2100 security deposit.  My calculations:

$21,600 gross rent

-2,100 manager

-2,300 taxes (rounding up)

-1,600 insurance (rounding up - $500k liability)

-900 yearly repairs (call the plumber, or A/C dude, etc)

-$1900 yearly accrual for things like new appliances, carpets, A/C units - as time goes on.

-$500 CPA (I plan to have 5 rental homes....I figured $2500 yearly CPA divided by 5 including my DC rental)

-$500 travel (1 trip to ATL every 2 years. $2000 expense divided by 4 homes)

-$1500 vacancy (1 month vacancy each 2 years.  $1900 lost rent+$900 broker fee+ $200 utilities = $3000=$1500 a year)

-$150  Misc:   Ancillary stuff. Could be Fed-Exing something, etc)

-$1700 HOA (rounding up. - Roof, siding, landscaping is theirs)

Profit: $8,450 divided by 250,500 =  about +3.4% per year cash flow. 

(Yes, a share of stock yields more - but I'd like diversity and some bricks. Also, depreciation of bricks - means my dividends are taxed at 0% since technically I have a business making almost no profit.)

Of course, this is without appreciation, AND without a 2008-style crash.    

*IF* over the next 5-7 years, this appreciates an average of 3% per year, I've done what I needed vis a vis ROI. IF less than 3%, well, my investment is a bit suckier than hoped for. Any appreciation more than 3% makes me a happy guy.

Anyhow, those are the details. 

So what will be the strategy?  On my normal internet connection, I'll search for organic vegetables, how I myself can save the earth from Climate Change,  new ways to cook kale and arugula,  modern movies and tv shows that glorify dysfunction and violence,   on my VPN pretend there's a Bill of Rights?   

Wow.  It was with great care I've prevented my Wife from seeing my browsing history other than one near-miss. 

Now I got Bank of America and Chase to contend with. 

Geez, I left Mom's basement, and now I have my own basement, and *still* I can't give freedom to my peoples. 

@Ash Patel. Situation on this piece:

*I got on it, about 34 days on market. I offered $975k and thought it was a done deal....then a local medical practice offered $950k - seller picked THEM - because they knew that medial practice for 30 years, it was a local fixture, etc. 60 days later - that buyer terminated because they were counting on the neighbor (hospice) to share the traffic-light --- and they didn't do it. So it came back to me, I said 'yes' but give me the same $950k - - I signed the LOI but before the other side signed - a golf cart company offered $1 million - with only 60 days due-diligence. At that point - I just wanted my shot at the property and I figured, enough trying to be straight up - tie up the seller for due diligence and terminate - just like previous people did. So I signed LOI at $1mm and have 45 days left on diligence. Bank/SBA loan is TOUGH to get for the business I'd have wanted to start there so I'd have to pay cash for the building and land and then put working capital into my company and frankly, I don't want all that money vested in one place. SO---I don't think 45 days is enough to find a national tenant, let them say yes or no, etc. I am willing to spend. few bucks on an attorney and civil engineer to give me their "best guess" to tell me that a strip mall, a Taco Bell, etc - would eventually be given permits there. So, the property hasn't been on market that long -the first buyer tied it up for awhile - now I;m doing the same. I agree it's a dumb idea to sit on property, especially one of this magnitude ($1 million in non-productive cash is HUGE for me). Between demolishing current buildings, and holding costs.....I figure, after 18 months, I'd be into this land for $1.2 million.

If its not wise to land-bank - (which I agree its not), then I should get out of this and move on. BUT....I can't help but think that between all the established, and upcoming QSRs, and/or MOM and POPs....... given time, this could be a nice profitable venture but I don't know where to begin

@Ash Patel I hear you.  Many of these triple-net leases have returns comparable to stock market dividends. And I can't help but wonder that the people who bought the land originally, and landed the tenant - are the ones who made the real money.     I've owned commercial properties in the past - - but it was MY business occupying it.   With your strip malls- do you screen the mom and pop tenants and have you had good experiences?  

Today - in Suburban Philly - (I'll save you all the history) --  I am able to buy a 2 acre piece of land for $1 million. Originally I got into this with hopes of building myself a new company there but for a variety of reasons I'm not sure it's feasible.  I only have another 30 days of due dilligence.    Anyway - the location iMO is awesome.  Very growing area. Right next to it - a big Toyota dealership, and CarSense - a Penske owned used-car superstore. Directly across - a new Wawa.  Half mile down the road, a 5 year old WalMart and large retail strips.     It's on the "main drag' in town - with 46,000 vehicle count.   I've spent time in the area - and I just can't shake the thought that SOME retailer or QSR would want that property one day.  Trouble is - I'd have to buy it without having enough time to find such tenants.  My purchase price is $1mm - I have it from a reliable source that already there's another local medical practice that would pay $1.1mm.  Point being - I think its desirable.     I've NEVER EVER done a rash investment.....but a small tiny part of me wants to buy it for the $1 miillion- - and then proceed to hope that one day I find someone to sell it or lease it to.  It would be QSR, it could be a small strip mall.     My novice thought process is this:  $1 million land.   3000 square foot building - let's say $650,000 =. $1,650,000 cost.     BUT -I look at net leased Chipotle, Taco Bell, Wendy, etc-  those are selling for $2.5mm + ....so I figure if I tie up $1million dollars for 2 years. I lose that cash flow, I pay some property taxes and insurance....but I should be able to do something good with this property   Trouble is, at this moment I have *no* idea what the endgame is.        So the cautious in me wants to invest in homes, or triple-net, make a SAFE 5%.......but I also keep wanting to gamble on this one.     Any thoughts? 

@Mark H. Porter thanks for sharing. Yes, that is my aversion to the Dollar Stores. Sure the cap rates look nice but the substandard locations make me feel I'm 100% totally dependent on the Dollar Store. Sure that's the case with any NNN tenant - but at least something in a good location - I have a good chance of landing another tenant. Question - when you did the Walgreen's deal - and even now, today - what did your research tell you vis a vis future of pharmacy retail stores? I ask because I lean towards QSRs -- I like that Amazon and drones - just can't produce cheeseburgers. I look at Walgreens, Rite Aids, CVS - etc - -many are in fine locations. Decent cap rates....but the Amazon/future online businesses worry me. Did you have those concerns? Thanks

@Jacob Franz @Ash Patel

Hello - - I've often toyed with a net lease.   Question on financing -  I'd put a minimum of 30% - maybe more down.    For a "credit tenant" ....  do you know if a 30 year amortization is possible?  Right now, my bank is telling me 25 tops.    My hang-ups on Triple Net:

1.)With cap rates low right now - you almost need 30 years to have any cash flow - -things like McDonald or Chick Oil A are doing 4%, even lower Caps.   Chipotle around 4.25 (at least from what I see).   

2.)Have either of you seen Triple Net deals go the distance? I love the idea of a corporate credit tenant. But- - -20 years into the future is a long time. In a changing world I get worried if XYZ fast food or drugstore - will still be there in 20 years. This is why I'm attracted to lower-CAP rates - the locations are better - if I see 4-5 chain QSR's on the street - I feel that if my tenant leaves, I had a good chance of finding a new tenant.

3.)DOLLAR GENERAL: I'm told they're a credit tenant. Of course, higher cap rates. Now, I understand Dollar General won't be located on Times Square :), but most of them are just way out there..... seems like not much action around the location.  Has anyone seen how DG is about abandoning the spot and leaving?

Thanks