All Forum Posts by: Michinori Kaneko

@Stephanie P. Sorry if i've confused you. what i mean by the 20% and 30%, currently the owner is offering to basically pay 20%. If i put down the 30% instead of him paying, effectively i'm already down by 50%, meaning of the total purchase price, i was originally only liable for 80% (but with no money down), where as no I am liable for 100% and putting down 30%. So instead of me getting a 20% off deal on a no money down deal, now i'm paying 30% out of pocket on a no discount. I don't think the total price is inflated, like i said NOI/cap rate gets you to the total purchase price (before the 20% seller finance). i think i am confusing you there.

Second thing you mentioned is an interest thing. so basically we refi on the mortgage, then use that proceed as a purchase of the LLC ownership? I'm trying to see if that make sense from title perspective since a) even if i knew him he's not going to give me majority interest in LLC without the payment first, and b) the refi will use the building as the collateral which is held by the LLC, so i'm not entitled to the refi cash? What am i missing?

I agree about Hard Money. that is my last resort. that's i wanted to ask for alternative routes here before i go down that path. I am ok with putting some money down. its just that 30% of this deal (or even 20%) is a significant amount, i don't think i can come up with that kind of money out of pocket. 

@Stephanie P. i am aware that the appraisal uses income approach, as i mentioned the purchase price is NOI/ local cap rate and the NOI I am using is what was reported on the seller's schedule E for 2019. The building does not get top dollars and lots of vacancy, but still cashflowing a lot (enough to cover mortgage payments) and that also gives huge potential for improvements in the revenue in the future. I understand that 20% owner's forgivable loan makes things more complex, that's why i am here to ask for help and recommendation. Between the 20% he is offering and 30% you are telling me i need to put that, that is a difference of 50% of total purchase price. This deal is appealing because it is a cashless deal (not sure if you listen to podcasts, but cashless deals are dreams of investors). Yes it's difficult to overcome all these issues. that's why i am asking for recommendations here, I already know that its very difficult to get a mortgage via traditional methods. Essentially i am asking for recommendation on someone who's willing to lend based on the buildings cashflow only. Maybe my only option is hardmoney lenders, but i wanted to see if there are any other lenders out there willing to do something like this. i understand if you aren't one of them.

Hi, I do definitely see your point about the "inflated price" but my thoughts are if you calc the NOI/local cap rate the actual value will end up around the total purchase price. I do know the owner personally.

This will be a long term rental.  There are areas in the building that can use some work, but is not essential and does not impact the rest of the building, so i don't intend on doing any immediate rehab (maybe if the occupancy nears max i will eventually consider putting in some money to fix up the areas that are currently not being used).  The property has an onsight manager who excel at what she does and she has been there for a very long time.  I do have capital that i can put into the deal if i had to, but prefer not to if i could keep it as a cashless deal (who wouldn't?). 

This will be my first commercial property. I do own some duplex and triplex.  Thank you

Indiana

Hi,

I have a potential property i want to buy.  It is a residential building with approximately 60 units.  I've seen the numbers, it cashflows well, but i've spoken to few lenders and it seems like it will be very difficult for me to find a lender for number of reason.  I'm wondering if anyone knows a lender thats willing to finance the deal with all these (potential) issues in mind, Please note i'm looking for a lender and not looking for a partner at this time:

1. the building is only about 55% occupied.  THere are several reasons but basically the building used to be in a very rough shape, and when the current seller purchased it he evicted almost everyone one out.

2. Some are weekly rents, some are monthly rents.  rent frequency is based on the renter's income payment frequency. This building is also a low income housing. most people living here are living off of social security.

3. The seller is willing to give forgivable loan of 20% of the purchase price, and the remaining 80% needs to be financed from a lender. based on 2019 schedule E, the building's NOI (or rather EBITDA) is more than enough to cover the 80% financing. I would say NOI is 30~50% more than the mortgage payment based on what the interest rates will be.

4. the price is very low compared to other 60 unit properties. i know most lenders has minimum per door loan amount.  I would be significantly under this requirement in most cases.

based on these issues, i'm wondering if anyone has recommendation on a lender that would still be willing to finance this deal.  Thank you for your help in advance!

that makes sense @Greg M. in my case the building i'm interested in the meters are not split (and will be extremely difficult and costly to split) so i will be better off paying the bill anyways.  So trying to see if solar panel would actually be a worthy investment as an alternative to putting in a split meter.

@Account Closed FYI

hmmm interest. this is for a multi family residential building so more than just 1 unit, not sure if that makes a difference...? i've seen many quotes say the payback is around 8 years... thanks for your inputs both.

Anyone?

was that the one you sent me? i remember looking at something on w washington...