All Forum Posts by: Richard Belliveau

You have some funds to invest in direct mail so you can generate leads. Flip the contract, after you have the deal.. You can add another 15k right there. This now gives you 30k less cost of mailing without using the equity on your home.

I guess what I'm saying is to leverage the funds you have now to give you more options in the future.

The best to you and family.

Richard

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Hello everyone. It seems like beauty is in the eye of the beholder in the case of a refundable deposit and when it goes hard......

I was in the mindset of 1% of purchase price is usually sufficient. I am speaking of commercial deals only now.

I have seen recently where some sellers want a lot more than that saying" what's the difference it is refundable anyway!"

This is true but from the buyers side too much is too much and it seems there should be a standard in the industry like a % of purchase price with deposit going hard( turns non refundable) in 21 to 30 days..... Buyer then can get their money back for any reason whatsoever.

My question and asking for certain feedback here:

What have you investors here usually pay for a deposit( refundable) and should it depend on the deal or something else?????

I would love to hear the feedback and since it is refundable it seems it should be in bold in contract that escrow agent sends money back to investor within the 21 days or 30..... with a written notice to seller, saying money back no matter what and for whatever reason during due diligence period.

Thoughts??

Thanks... Richard

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I just was shocked when I heard from my dentist friend today. He had met with his CPA and the CPA told hime since he was making a lot of money and also owned the building his practice was in- he is not entitled to any special cost segregation or excellerated depreciation on the real estate about to be acquired because of his income he has!
According to the IRS code he told me that the depreciated asset or the write off or deductions are based on a % of income- not on a dollar per dollar write off- but as a % of income!
Has anyone heard of this before- because I research the cost segregation and thought anyone that bought a property can depreciate the asset after a cost segregation analysis from accountant or special servicer armed with full knowledge of IRS CODE. This depreciation can be rapid if qualified and it would be possible to depreciate instead of 27.5 years in only 6 or 7 years. so deductions would be way higher.......... Thoughts? Can not wait to hear about this and I hope I explained it right...
Richard

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Some good posts above but I maybe add something here. You stated city is making repairs as needed? Not sure what that means and to what extent.
Assuming you need to make repairs yourself- and have the 50 to 80k to fix it- owner financing would be great with lower rates-
However OPM is always good so I would offer 170k cash- get private money loan of 250k- which is approx 65% arv- repairs included.
Seller is happy- he got cash- you used other funds- maybe a little down out of pocket to show some skin.
Now you get better price and have all money needed for repairs.
Obviously a sub 2 appraisal will be needed with list of repairs you intend to do.
Need to know exit strategy- if you get private money or " hard" fix and refi- hold for cash flow.
Or fix and sell. Leave some meat on bone for buyer- as the spread would be great for you.

Not a big fan of seller financing with major repairs needed unless you have money to pay for repairs- lots of variables here.

Good luck but this looks like a fix, refi and hold- as long as you can cash flow. In that area might be unlikely-

fix and sell- you could make 80 to 100k and give a good deal to someone for quick sale.

Just my take.

Good luck.

Richard

0 Votes

Hey Rasheed. Thanks for the post.
The way to go here if you are indeed going to wholesale it, is to get it under contract but the price needs be about 130k. Not sure if he would lower the deal that much. Then you flip to rehabber for 5 to 7k fee.
Or you can keep it yourself- get some private money- pay off liens, get seller some cash and fix yourself- but I would not pay more than 135 to 140k- assuming your numbers on ARV and repairs are close.
Only other way- since he has equity- would be to get seller to do subordination for his equity. Needs to be real motivated for this to work. This is when he would agree to be junior debt- behind the other debt coming in( private money- hopefully lower rates)
Now you can get close to 50% LTV loan- pay off debt, have enough for repairs- and give seller a little cash.
Other key would be for seller to hold paper with low, low rates or better yet- just a bullet within 12 months-- so your holding costs would not be real high. One of keys to doing it like this- low rates from both lenders- keeps holding costs down and increases profit( hopefully)
Benefit to seller is that you can offer closer to his price.
You can give 155k.
New Structure would be:
110k new private senior debt
seller second- 65k- total 175k
Now you can rehab- sell- and your debt would be closer to 185 after , holding, closing costs. ( buffer for extra repairs?)
You sell for 210- make 25k.
Not the sexiest deal- but another way to get it done if you really wanted it.
Best way is to get seller down to 130 and wholesale it for your 5-7k.
Hope this helps and the best to you!!!

Richard

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My mistake. Forgot to take out expenses from 49k.

Would have to rework note from seller-.

Like Belinda said- lots of factors here.

Owner financing the way to go and obviously the longer he will finance the better without balloon.

My apOlogies about NOI.

Belinda is right on. Realistic NOI on this might be closer to 30k.

Also never buy on projected NOI- buy on actual numbers.

Good luck!

Richard

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Hello Michael. Expenses are real low for this property but you must know them to be accurate. Expenses on parks usually run 35 to 45% of revenue but hey- great at 14%...... I noticed you did not have taxes in there or management fees? Would your brother be the park manager? I think realistically expenses would be double what you have there- hence lowering NOI to approx 35k

With is in mind- please get rent rolls and exact expenses over the last 12 months. Need to know NOI before you know what a property is worth.

Also owned free and clear so seller financing should be an option of course. Based on a 10 cap at 35k NOI this would be worth 350k.

Make sure of NOI like stated and then you can use the 10 cap to evaluate the worth.

If rents can be raised even to 160 a month and get leases yearly instead of monthly- this would make the property be worth an additional 54k or so using the 10 cap.

Could be good value add deal for you.

Make an offer using seller financing- see if the seller would do it.

Low down- maybe a jv partner- for down payment- low interest rate where you can cash flow at a good DCSR.

350 SALES PRICE- 50K DOWN

LOAN OF 300K

6% INTEREST

10 YEARS

NO BALLOON

PAYMENT= 3330.62 A MONTH

39,967.38 A YEAR.

THIS GIVES YOU 10K A YEAR PROFIT- OR 20% CASH ON CASH-

without raising rents.

DCSR = 1.25- decent.

This is just an example of how to structure the deal- one of the ways.

Good luck and hope this helps!

1 Vote

All Forum Posts by: Richard Belliveau

Richard Belliveau has started 2 posts and replied 7 times.

Post: Newbie Investor (looking for advice on my situation)

Post: refundable deposits on commercial

Post: CPA TELLS MY DENTIST FRIEND NOT TO INVEST IN THE DEAL

Post: Seller Financing

Post: seller financing

Post: First Mobile Home Park - Fair Purchase Price? 28/33 pads rented @$140 monthly

Post: First Mobile Home Park - Fair Purchase Price? 28/33 pads rented @$140 monthly