All Forum Posts by: Nicholas Lohr

If an investor participates in the rehab of a property but not in the management is that considered active?

Per the Howey Test; I know all the investors have to be active in order to not have to register the investment with the SEC. 

Does construction and then nothing thereafter count as active enough to satisfy?

@Bjorn Ahlblad

makes sense appreciate the response, thank you.

At this level we’re not dealing with 30 year fixed anymore so do you happen to know if month to month vs leases affects the refinance process with banks?

I know this question has been asked a bunch on the forums but I can't find any that are specifically for large commercial multi families. (5 or more units)

What are the pros / cons of re-signing the tenants or letting them go month to month?  

Anything to be aware of that residential investors don't have to worry about?

What Ralph said is perfect.  

I'd also add that a 7.9% cap rate may also give you some incite into the neighborhood the property is in and / or the state of the property itself. 7.9 is a pretty high cap rate and often the higher the cap rate the lower in class the neighborhood or property.  

This isn't set in stone though, more of an overall general theme.  One could get lucky and there are exceptions but usually the higher the cap rate the lower the quality. 

Shop around more. I just got 3.95% from Opus Bank.  This was a refi of a 6-plex in Sacramento. 1.1 million dollar loan. 

By nature a property in a BRRRR deal usually needs a good amount of work. Hence the 2nd "R" in BRRRR. And sometimes the property needs so much work that a conventional lender like a bank won't touch it leaving one to purse the hard money lender option.

What usually happens is the investor takes the hard money loan, rehabs and rents the property as fast as possible, and then refinances with a bank because a bank gives much better long term loan terms.   Once a property is all fixed up and stabilized is when a bank loan is obtainable. The hard money lender is like a bridge to get to that long term and more favorable bank debt. Hard money loans have higher interest rates than banks. 

As far as your specific questions, all of that can vary. Usually YOU pay the down payment and they lend the rest.  And that can include the rehab costs as well, but not always. It really depends on your terms with the hard money lender. And yes the payments usually begin right away.   

I'm still a renter in San Francisco yet I also own 14 units in Sacramento. The cash flow from the Sacramento units more than pays for my rent in SF. 

Question for anyone who has experience in commercial multi-family in CA.  I'm about to refi a commercial multi family property. (nothing too huge, just 6 units, $1 million loan) 

I already understand the difference between Recourse and Non Recourse Debt. My question is, it it worth it to go for the Non in CA where the the laws are more borrower friendly already compared to other states.  I've been quoted an extra 40 basis points to get the Non-recourse. 

I'm curious what others have done?

thanks all!

Without seeing the actual numbers, yes you are correct that the mortgage payment usually goes up but a big part of the BRRRR strategy is the fact that you are renovating, so the rent you collect should go up as well which should more than cover the increased mortgage payment and expenses. If they don't then the deal is not a deal. 

@Marlon Johnson  No they are not all individual properties, they are grouped within 3 parcels.  2 houses on one parcel, 6 apartments on 2nd, and the convenience store, townhouses, and rest of apartments on a 3rd. These aren't "condo units" they are just regular apartments.  

6-plex, 4-plex, duplex etc.. is how they are referenced.