All Forum Posts by: Shane H.

Browsed through this, interesting read to look back.  

Kansas has been home to the boom/bust of the Oil/Gas industry -- not sure if the shale boom was a bust or not -- dont know much about the industry other than sitting back and observing what goes on in our rural communities.  While the big guys are pumping money into the rural communities it sure is nice, but once they leave, can be quite detrimental if people are not prepared for the inevitable shut off of money.

Oil exploration/drilling was going gangbusters since 2008 or so if I recall...first the whole state was blanketed with surveyors, then came additional teams to further pinpoint where to drill, then came the drill rigs.  Now when I go out hunting to the remote parts of the state, do not typically see many of the oil guys around.  2-3 years ago when driving the highways at night out west you'd see the sky lit up for miles around with various drill rigs.  Now you see the typical guys checking wells/hauling water that were always there before.

Welcome @Arthur L. Timmins Jr.

  I believe there are surprisingly quite a few people from Wichita on here, how many are active on a routine basis is another question though.

Have you attended any of the Wichita REI meetings? They have one once a month (skipping the one for July due to the holiday weekend) @Daniel Wampler is the facilitator of the monthly meetings -- can find the site on Meetup.com

This thread is a bit old - so may or may not be beneficial to anyone here, however to any experienced investors, there is a company in Wichita that has substantial investments in this niche and would do joint venture deals with experienced investors per their website.

If you google their name and self storage you'll find numerous articles by business journals all over the country.  I believe they may do private lending in this space as well, not sure.  From what I know they have a stellar reputation and are nothing more than class and professional and one of their developments in Wichita (The Waterfront) is class A++++++ all the way.  One of my favorites in town.

Clark Investment Group -- http://www.clarkinv.com/   You can also find them on facebook  https://www.facebook.com/ClarkInvestmentGroup their website is down now for some reason - they have a park page up - however believe they are working on getting a revised site soon.  Maybe this will help someone who searches for this topic at a future date.

All the best.

This topic has slowed down a bit, however I believe one other restriction using an IRA to invest in real estate is that say for example I want to use my own IRA to purchase a duplex, you somewhat limit yourself as to the type of work you can perform on the property.

Correct me if I'm wrong, but I believe that is one limitation of this method -- would be great for someone who wants to take a hands off approach and simply invest the money from "afar," however if you prefer more of a hands on approach, probably not the best solution.

Something being in the insurance industry myself presently that I have often thought of as an obstacle to working independently in the future.

One thing I would look into is purchasing the lowest (reasonable) deductible plan that is set up as HSA qualified.  Performing a quick google search it appears a plan with a $2500 deductible for a family would qualify (there are other qualifiers as well).  However when you stop to think about it there are many plans that do not qualify as an HSA that have significantly higher deductibles and will cost you more per month.

Sign up for the HSA plan then start loading that account with money so you have it set aside for when you do need it. The nice thing about the HSA is the money is set aside pretax and unlike a Flexible spending account, there is no time limit on when you can spend the money. It's there 10 years from now if you dont touch it. Think of it as a tool similar to an IRA, however whenever health care needs arise you can use it.

Another thing I have found through trial and error is that when you do need health care, if you tell the office to bill you as uninsured and that you will pay the day of service if they give you a discount, after you fight through the confused looks of the Accounts receivable dept - you can see a significant discount.

A couple strategies I would employ and will employ when I cross that bridge.  If you are asking for the cash discount, make sure to get the procedure codes from the office and run a rough check through this site http://fairhealthconsumer.org/ and the medicare site as well.  Sometimes the medical provider will try to screw you if you are paying cash and uninsured for some reason.  Usually the highest bills come when you they run you through the system as insured though.

Kind of a windy post - but some food for thought.  A subject I'm somewhat passionate about as the way we charge/pay for health care in this country is EXTREMELY messed up.

I've always supplied garbage disposals (though may only supply those in high end homes from here on out) fridge, dishwasher and range/oven.  Have supplied washer/dryer if kicking that in is all it takes to win what I think is a solid tenant.  They arent much used.

I think what you supply depends on your local market and if you sense throwing something in to sweeten the pot to win over the right tenant is a good move.

Chad I'd be curious as well.  Nice to see a fellow Wichitan on here...what part of town did you (or not) purchase the property in?

Have you priced out the foundation repairs?  Might be worth paying someone to come in and give a quote/their opinion to what it would take to fix.

Foundation issues can get pricey in a hurry depending on what needs to be done to stabilize a property.

As to the class of property it would be something I would shy away from personally due to the likely quality of tenant, however I'd probably figure in a higher vacancy rate as I'd guess you'd have a higher turnover and also a capital expense reserve of some sort to keep money aside when repairs are necessary/repair damage from tenants, turn a unit etc.

Someone else might have some other thoughts, but those are mine thinking aloud.

Are the husband/wife reasonable enough to carry a note if they are in the midst of getting a divorce?  (Maybe I read the post wrong however sounds like a dicey proposition to ask them to carry the note if they are in the midst of turmoil)

Yes - echo the sentiment, would love to hear more details if you can share -- general location, (are you the property owner, contractor, restaurant owner, etc)?

Something I'd like to learn a bit more about. 

Going to throw a wild guess and say the delays were due to permitting/local officials?  HA

@Nick L.

Here is some of the nuts and bolts

• 5800 gross sq ft per floor -- floors could be rented as one unit, however many are broken down into varying size office suites -- most floors are completely finished
• "B" Grade building
• Gross lease is the norm - $7-9 psf
• 11 floors --  a fairly tall building for Wichita -- probably one of the 5 tallest buildings in town if I had to think off the top of my head

Summary of the floors - detail below:

• 3 floors still owned by CA investors who I can only assume have not made payments on their loans - floors are vacant per my last visit - they are not paying their condo dues
• 2 floors still owned by the deadbeats who have securities fraud charges pending against them and are the developers who condo'd out the building
• 2 floors owner occupy 
• 3 floors owned by local investors 
• Any floor owned by a local person was purchased out of foreclosure with the previous owners being CA investors -- original sale prices I was told was $300-400k per floor -- foreclosure prices $15-80k depending on when they were purchased, lower prices came later

Only 2-3 floor owners appear to be current on property taxes - some have not paid since 2009-2010

I believe floor 4&11 could be purchased for $20k or so total.  Owner took out a mortgage in 2013 for $68k for the purchase of both

Condo association filed delinquent assessments on 3-24-15 this year for Floors:

1, 5, 4 & 11 -- not sure why they did not file on some of the others - per my understanding the original developers are not paying either, however thats probably a moot point since it would be like attempting to get blood out of a turnip.

Taxes per floor range in cost from $2700-$5100 -- the ones with lower assessments went and argued with the appraisers office once they bought out of foreclosure

Specials payable until 2023 of $4421 per floor  (once this is done - helps a bit with cash flow -- specials were used to change some windows, make street level improvements and upgrade the heating/air)

Last Income statement I could get my hands on was from 2012 -- Expenses per floor at that time (doubt it's changed much except the owners association dues are likely higher to make up for the shortfall of the other deadbeats)

Monthly expenses of $2500-3100

I believe the mgmt company is ripping the condo owners off - charging $3575 per mo for the building for building maintenance, $3046.23 per mo for janitorial, $3300 per mo mgmt fee -- these are some big ticket items I could see cutting back on.

So rough financials per floor per mo

****************************************

$3383      per mo rent (5800 * 7psf/12)
  (676)     20% vacancy allowance
  (643)     general/special taxes  
 (2600)     rough avg expenses per mgmt company - think quite a bit can be cut here
---------------------------------------------------------------------------------
(536)       rough loss per mo on a worst case scenario

$4350 per mo rent (5800 * 9psf /12)
   (652)   15% vacancy allowance
   (643) general/special taxes
   (2600) rough expenses per mgmt company - think quite a bit can be cut here
---------------------------------------------------------------------------------
455 cash flow per mo on a better case scenario

When you put pencil to paper this is not a good deal as it sits presently, however per my understanding - if every floor owner (or if the expenses for the building) were truly spread out over the 11 floors and all 11 floor owners (or one joint owner) was paying their share the monthly expenses could be cut quite a bit.  I have an income statement from 2008 for the 5th floor when most of the building was leased and everyone was paying their fair share - Net income of $11877 for the floor  (that was after property/special taxes)

Presently I believe a few things could be cut out (they may have already) for ex, there was a 300 per mo mgmt fee charged per floor, $276 per mo per floor janitorial fee, $325 per mo per floor maintenance fee, electric of $615 to 1000 charge (thinking it's that high due to others not paying) on the 2012 statement I have.

So the upside for larger cash flow is there and if you could change the ownership structure the price appreciation of the building as well. 

Maybe I'm wrong?  Would like to upload some of the documents I have however still learning the forum and dont believe I can do that?