All Forum Posts by: Oren K.

Derrick,

There could be a couple of reasons for this;

- Current owner purchased via taxes / distress / etc. and received no operating information. They are flipping it now and providing what they have

- Court ordered foreclosure / receivership / etc so PM only has operating history since taking over

- Owner bought property vacant and did rehab until ~6 months ago. Now tenanted and has some operating history to show.

Basically there should be a 'story' behind why there is limited info being provided and you need to find out what it is.

Regardless, limited information means more guess work on your part which means more risk and so a lower price to mitigate and leave a bigger buffer.

Good luck,

Oren

Phil,

This was done for a few years (2010 -2015?) with out much (if any) push back. In the past few years, the counties / cities in Ohio 'caught on' to this and will look behind a simple 'Quit Claim' or change of company name eventually. 

When they do, all the back taxes will be due (and possibly interest with penalties).

Even if you go ahead and do it (I would not), I would plan on the higher property taxes eventually when doing my underwriting. If you get away with it for a couple of years (assuming you do), it becomes  bonus.

One way or Another Death and Taxes - They catch up with you.

Oren

Steve,

There are three separate loans (or four if I count your personal LOC / family) and you have to look at them separately even though they relate to the same property.

I would be surprised if any bank is going to lend more then the purchase price. I am guessing that that the bank is lending 75% of the initial purchase price as a short term (1 year?) mortgage of ~$150K.  The seller is lending $55K (down payment + closing fees). So far so good - you bought the property with NO money down.

In addition the bank if giving you a construction loan based on your personal credit (or other assets as collateral) for construction and release those funds based on hitting various milestones (e.g. permits pulled, inspections passed, etc). IF the rehab is $60K and they do 75% of that, then they are loaning you up to ~45K and you just need ~15K to cover the balance which you plan on taking from your personal LOC and / or family & friends.

If the above is correct, the bank will initially loan you $150K. The seller has a note for $55K. The bank also has a separate note for $45K. In addition, you owe ~$15K to your LOC, family & friends.

At the end of the renovations and stabilization, you owe the bank $195K ($150 + $45), the seller ~ $55K and $15K (LOC, etc.) for a total $265K and have a property hopefully worth $350K ( ~13% return).

Now you refinance @ 80% to get a $280K mtg (based on $350K value). This pays off the bank ($195K), the seller ($55K), your LOC ($15K) and still leaves you with ~$15K in hand. It will actually be somewhat less since there will be legal & discharge fees for the original loans and legal & costs for the new loan.

Just make sure you account for all the interest / legal / transaction costs on both ends of the process. As well, be very sure of your rehab budget.

Not really sure what you mean - All the business that are in an office building use the same address except the suite / unit number. So if your tenants are assigned a unit number (regardless of if they are physically separated or not) and the receptionist accepts all deliveries, the mail / packages are can then be distributed to the correct person.

Also, you are assuming that the some person will use two (or more) of the business at your virtual office and happens to notice the addresses are the same. Most people would just think it is a coincidence and move on. 

Unless they actually visit the office, they will have no way of knowing.

Anyway - good luck.

Karl,

Most agents, over time, tend to specialize to one degree or another so just asking for an agent could get you someone who only does larger (>100K sq ft) industrial leasing (unlikely on BP but you get the point).

There are any number of Cleveland area agents who hang around BP but each has their niche. For example;

@Matthew King focuses on mid (>10 unit) & larger (>100 unit) multi family. He lists other properties but those are the majority of his listings.

@Tom Ott works for a turnkey company (Smartland) that primarily does single family / small (<5 unit) though they have done mid sized properties and are trying to evolve into a syndicator of even larger deals.

Let the board know more about the property; how many units, what area of the city, etc and you should get some recommendations.

Oren

@Christian Hutchinson @Michael O. Appreciate the input.

From your comments and other stuff I've read it seems that the further north you are from Grand and towards Davidson the 'slightly' better it gets. Also, being a bit away from the highway also helps cut down on the traffic (volume / noise).

I totally agree about the security. I've learned the hard way that for this kind of area, access control, lighting, video, even a patrol are very important.

Regarding rents - Do you really think that market rents for an elevator apartment (not house) are that high. A quick check on rentometer suggests closer to 600-625.

Any recommendations regarding an agent that really knows the area well and what programs may be accessible?

Oren

Patrick,

Real Estate is a numbers game with a sprinkling of vision. So 12 (units) * $600 * 12 (months) = ~86K. Assuming this is a through rehab, for the first few years, operations will be ~45% leaving an NOI of ~$47K. At a 10 CAP just for simplicity (once stabilized @ 90% occupancy), ARV is $470K; over 100K (25%) built in equity. If you can stabilized, sounds good.

One thing you did not mention were local occupancy rates. You need to confirm you assumptions (rents, occupancy rates, refine the rehab estimates, etc.).

Sounds like a very good project - good luck.

Oren

So there is a good size multi-story property not far from Dexter & Elmhurst that I am kicking the tires on but not sure how bad the crime is around there or what the local rents really are. Some sites have it as below 'hood' and others not so bad.

I get that one side of the street can be a burtout war land and the other side safe and even upscale. Looking for first hand knowledge of the area, if there is any sub - sub pockets that worse / better, etc.

Thanks in advance.

Sure - I have used a company called High Peak Roofing and been happy with their services. Send me a PM with your direct email address and I will do an e-intro to the owner.

Oren

In most juristrictions, how you internally partition (non-structural) a property as long as there are no electrical / plumbing changes is fine. Even with electrical / plumbing changes, getting permits is a normal thing and is not related to zoning.

Changing municiple address is some thing you will have to check into but not sure why you would do so.  As a virtual office, there are certain basic services that is usually included in the base price. A common receptionist is one of them. I would expect the receptionist to accept all mail / package and distribute to correct tenant.

What your tenants tell your customers (e.g. unit / suite number) becomes unimportant. Rather the name of the company tells the receptionist where to drop it off / who to hold it for.

Alternatively, you could set up a secure common delivery mail box with slots for each unit so the mail delivery person only has to make one stop.

Good luck.

Oren