All Forum Posts by: Nick L.

@Spencer Rossie

Could you purchase the pump station together with the foreclosure property? That way you would get an extra play from being a monopoly provider to the other owners.

@Spencer Rossie

The land locking situation is easily resolved - most or maybe all jurisdictions allow an "easement by necessity". Contact your city and/or attorney.

Who owns the pump station? Can you work out a deal with them? And how confident can you be that they will be around for the long term to honor the deal? 

Are there other properties nearby that also depend on the pump station? It might be worth contacting other owners to see how they have resolved the problem.

@Recia Davis

 I've bought this kind of thing before, but on a smaller scale. (The technical name is "fractured condos".) I would do it again in a flash if the numbers were right.

A very important question is whether the units are enough to control the HOA board. It's a huge negative if other owners could prevent rentals, for example.

As an investor I would analyze this like I would any apartment deal - NOI, cash flow and cap rate. The trouble comes with financing - many banks won't touch any deal with the word "condo" in it, and others will shy away from any deal like this that doesn't fit neatly into a real estate category. Appraisal is another related problem.

As a result of the financing issue you could not expect the sale price to be the same as for a 40 unit apartment complex. For the property I bought, it was an attractive property in an attractive locaton at an attractive price, and even so there were only two potential purchasers. The other guy had to offer ridiculously low because of financing constraints and I had to call 15+ banks before I eventually found one that would support a reasonable valuation.

@Michael Norris

There are plenty of tutorials on IRR, NPV and related concepts if you google for them.

At its simplest, IRR can be defined technically as the rate of return of a project that brings the net present value to zero. More meaningfully, it is a measure of how much better a project is than the alternatives.

For example, if I am an investor and say that my minimum rate of return (IRR) for a project is 8%, and you are offering a project that brings 10%, it is attractive. If you are offering 6% I will look elsewhere.

@Michael Norris 

Like @Jeff Kehland @Steve Vaughan said, IRR is a simple formula that depends on the interplay between a lot of values that are very hard to guess. As a result you can make the IRR say pretty much anything you like by changing some assumptions.

Since your investor sounds like a financially sophisticated person, a way to impress him or her might be to run a "sensitivity table" that shows various IRRs depending on the inputs. There's a decent thread on it here if you have some Excel experience: http://www.mrexcel.com/forum/excel-questions/61463....

Of course you can use pre-built Excel models like @Joel Owens said, but you should still understand IRRs so you can answer your investor's questions.

@Kevin Forsythe

You could get the property under option or purchsae contract for a small amount and then sell the contract to an investor to make your profit. 

For bonus points, do this in a self-directed IRA and you won't have to pay tax on it.

@Johann Kleisch

 I'm with @Ramon Jenkins. The best part about Milwaukee is that out of town investors write the whole place off as a rustbelt city. In fact, like all cities it has hundreds of different neighborhoods with their own characteristics. So there are opportunities to buy in B or B+ areas that are priced like C areas. This is less the case in Chicago because there are so many investors competing for deals.

I just showed Ramon one of my 8 units last week. If you come up this way let me know and I'll give you a rundown of some investable neighborhoods.

@Dave Hurt

 Wow - that is a serious build out!

Your project strikes me as similar to one I had in mind for a building in my area (photo below). Great location, same size building and with front and rear patio/parking opportunities.  The area is hot for restaurants but on investigation it was the cost of redevelopment that killed the project. It would need to rent for $22-25 a foot built out in order to cover acquisition and redevelopment costs, but comparable restaurants are renting at $15-18. 

I still love the building and site though... just need the dream tenant to come along!

Good looking project! Thanks for sharing.

That looks like an industrial clearspan-type building with a steel frame and curtain walls. Is that right, and did it make the conversion any easier than with a traditional building?

Would you be able to share any data on square footage and improvement cost per sq ft?

I've run into this situation before. If the LL is a big organization like a REIT they may be unwilling or unable to negotiate lease terms with individual tenants.

Or maybe the LL just thinks their space is hot enough that they don't need to negotiate as another tenant will accept the default lease terms.