All Forum Posts by: Nick L.

That's what title insurance is for. A default policy will often exclude mechanics' liens but you should be able to get that clause removed.

Some title companies will request the seller to provide lien waivers for all work performed over a certain dollar value in the last few months. Of course this is not a guarantee but it helps to reduce risk.

They can be a good business but you have to really know what you're doing. 

Potential problems:

- High cost of maintenance & utilities, especially with older buildings and machines

- Theft, personal injury claims and other insurance problems

- Competition from other facilities or in-building laundries

Another problem is getting accurate financials. Since most facilities are cash-based you can't depend on seller records. You might have to sit outside for a few hours at different times and estimate business volume based on patrons entering.

@Shawn C.

First question - where in Austin are you getting a 7 unit building for $200k?!

Second question - why do you need seller financing? Is it on better terms than you can get from a bank, do you not have the credit for traditional financing, or would the building not pass commercial underwriting?

Re the Schedule E, I don't blame the seller for wanting to qualify you as a buyer before getting into the details. When you submit the offer, add a document review contingency that requires the owner to provide you with a Schedule E and whatever else you require within a few days of signing. That protects both of you.

@Sean Waeiss

Did you find someone? Can you make a recommendation?

Funnily enough I just noticed Joe Fairless recommending the exact same book on a different thread today.

@Doug N. The one that got me started was this one, on a recommendation from another forum I think. It was the first book I had read that presented realistic numbers and explained cap rates etc. in a way I could understand. It also explained repositioning to me as a way to force appreciation. It was refreshing to read something that made sense analytically instead of endless bogus narratives about making a fortune with no money down. 

I believe Frank Gallinelli's book is similar to the one you describe and also very good, although I haven't read it. I think he is a contributor here on BP too. 

I'm right now in the middle of buying a property in a 100 year flood plain in Austin. I am ok with it because only part of one unit is in the plain, and because it was untouched by this weekend's floods. The annual insurance is an unpleasant expense but with luck that will be the only downside. 

@Joshua Nicholas I've taken two of the three REFM exams based on prior knowledge and also used one of the back of an envelope templates. I have high regard for the system and expect the courses would be good too. 

@Doug N. Great call on Steve Berges. I think he's underrated. It was another of his books that gave me the real estate strategy I use today. I think he would do better with fewer books and less repetition but the one you referred to is very good. 

@AJ Hernandez

I understand being torn between doing the project yourself and getting in over your head. I agree that you have to take a leap at some point. But if you would prefer to take a half leap, another route you could go is to partner with a contractor who has done this type of rehab before. 

There are many ways that this partnership could work and anything you agree should be written by an attorney. A typical way would be:

- You bring the property and 25% of the rehab cost

- Contractor brings 75% of the rehab cost + experience

- You both give personal guarantees on the loan

- You get to make final decisions on important topics

- Both partners split equity, cash flow and profits 50/50

This approach takes the rehab pressure off you and also relieves you of a lot of the financial burden. And hopefully your contractor will be able to validate your numbers and your plan. But it does mean you have to find a contractor that you trust and will be partners with for many years.

@Walter W.

That's another great perspective. Hard to say with Sam Zell or Starwood is on the right side of that deal. I'm guessing Zell though.

I am glad I started this thread and got so many thoughtful responses. You guys have really given me a great strategy for the next few years. Thank you.

Here's my new, more positive outlook based on what all the experts here have said:

- Buy urban core properties in tech-centric cities

- Retail is also good as long as you stick to urban properties in areas with growing populations and get destination-type tenants 

- Industrial may also be coming back but you really have to know that sector in detail

- Grow conservatively and keep large reserves

- Cap rates are likely to stay low for a while due to low interest rates, capital inflows and a generation of renters rather than buyers

Thank you again guys. This discussion has given me a great direction. I'm off to buy some properties in downtown Austin!