All Forum Posts by: Shane H.

@Nick L.

I have some financials (not the most current) but shouldnt have changed much and some documents going over the expenses each floor had.  Also will have GLA etc.

Will put that up a bit later tonight once the little one heads to bed.

Believe it or not, per my understanding most of the floors are decently set up and leaseable right away.  Finishes are ok -- maybe at most need some paint/carpet.  (I've walked the whole building but a couple floors at that time I couldnt do much exploring on other than the hallways.

As for TI's --I think on each floor it would be negligible, (havent been through every one with a fine tooth comb) however almost all are built out fairly nicely - may need some paint or carpet at the least.   Downside - there is a lot of "B" grade office space avail   (Though as I alluded to earlier, one building owner has completely turned his around over 4 or so years) and is 80-90% leased.

7-9 psf is gross lease, full service (ie internet/phone electric, etc is all included) -- I'm sure you could do triple net but per my market research that might turn people off and you'll need to lower your rental rate.  No one else DT typically will market that way.  For some reason there is just an overabundance of what folks are terming B grade office space DT and this would fit in that category.  I've got connections as far as trim carpenters to convert an office to finer finishes, however due to the buildings age not sure if you could get it of to an "A" grade status or not....the #'s probably just would not make sense at this point.  That being said, several projects are under way now, demand for DT residential is very high, one very large residential project that has been sitting for years just got the green light on the loan paperwork, more businesses prospering etc.  So the upside is there.  New airport opened, relatively new DT arena with development going on near it, new fitness center (HUGE)  -- so lots going for it.  I live here so I have a vested interest and may have some rose colored glasses, however have seen the changes first hand over the years and we are light years ahead of even 10 years ago.

Off the top of my head I think each floor has ~ 5800 sq ft to lease with varying office suite layouts.  

Will add some more of the financials later.

Entertaining to talk about this with someone who shares my same interest -- many others I have spoken to tend to glaze over at the concept.

@Nick L.

I've spoken to one of the floor owners a couple times, one time 2-3 years ago at length when he agreed to sit down with me and discuss how he liked the building when I was considering purchasing another floor avail through foreclosure.

I think the other floor owners do not have the money (part of the problem with the building are the high expenses (electric, gas insurance, property mgmt, elevator maintenance) all shared and divied up per floor - and with only a few paying in to these expenses it just exacerbates the the problem, secondly 2-3 people are owner occupy and they just wanted the floor for themselves, really have no interest in being RE investors.

Where I see the opportunity is getting the building stabilized - getting the bad people out getting it leased up and getting the specials paid off - once this is done this would be an amazing investment.  Lots of work and some money to be spent to get from point a to point b, however I've held back a bit due to no having deep pockets to weather the storm so to speak while getting the building stabilized.

Thinking it would be a good idea to see if I can schedule another sit down with the floor owner who had visited with me before.  I'm open to a partnership and have no problem organizing such a venture.  I think this can come together -- still lots of risk.

Been trying to brainstorm what to do to get the Brokers to stop turning their noses up at this building.  It's kind of a "little/big town" -- decent sized city, however a good 'ole boy network is in place and everyone knows everyone.  If you ever experienced such an environment.

Have any interest in investing in Wichita?   HA

@Nick L.

Thanks for the reply.  Out of curiosity, the building you purchased your condo's in...was it originally condo'd out by individuals with the names of Dave Lundberg & Michael Elzufon from the twin cities area in MN?

The timeline for the foreclosure sounds similar to what happened here and the building is close to their home operating area.  Have a feeling they will be spending time in KS Jail with all the trouble they have caused down here.

I've pondered this investment for 3 or so years now, in fact one of the condos was avail in 2012 and when I called to write the check/submit my purchase contract, someone had beat me by an hour or so and lost out.

Cliffs notes version - some years back a group bought several of a cities dilapidated office buildings, convinced the city to give them loans, some were in the form of specials, etc - completed a few minor upgrades to the buildings, then condo'd out the buildings and primarily sold the condo's to out of state investors.  The out of state investors ate it up even though on paper the deals didnt make sense,  Most have been foreclosed on and for some reason there are still a few lingering around where the foreclosures have not gone through yet (foreclosures that should have started in 2008 or 2009)

2 of these buildings individual investors have been able to gain complete control of -- One in fact has his for sale right now - it needs some work but is 8 or 9 stories with a parking garage for $850k if I recall.  I know the guy, not well and need to sit down and talk with him.  I'm fairly certain he has nowhere near that in the building.  Per the last article I could find on the building from April of this year when they gained control of it, vacancy rate was at 95% (when they started 3 -4 years ago vacancy rate was 40%) -- With the last floor they got back it sunk their vacancy rate back to 85%.  Im sure they will fill the last bit of space.

To get to my point, the downtown area these buildings are located in has a lot of upside - lots of new projects going on, lots of demand for downtown residential here -- office space unless it's class A is a bit harder to rent though unless you have doorside parking - (Guess us midwesterners are lazy)   I think this building is great, has a lot of history, however just has a poor marketing scheme and bad stigma with it.  The one downside is no doorside parking, however the city put in a new parking garage literally steps across the street so parking would not be an issue.

The building I've been investigating is 11 stories, has 4 or 5 owners not paying their share of electric, maintenance fees etc, and all floors have different owners except one owner owns 2 floors which happen to be for sale -- I've noticed the owner (of the 2 floors for sale) recently had posts up trying to lease the office space - (crappy ad) and I've also noticed he tried to auction the floors (sale didnt go through) and he's also had liens filed on him by the condo association for not paying his share of the bills.

My thought was to find an outside investor or do this myself (floors could be had cheap) build an alliance with the floor owners who are paying their share and wrestle control from the non conforming owners, then reform the structure of the ownership of the building where it could be sold in whole again, hence creating value.

I'm very familiar with the building and know my city backwards and forwards, connections etc - think this building has had some horrendous marketing done for the office space, (no website, brokers in town not wanting to steer clients to this building etc)   I definitely think this place could be turned around and once you pay the specials off (about $39k per floor) rents of $7-9 a sq ft (full service) would cash flow nicely - not to mention the upside one has if partnering with the other owners and changing the ownership structure.

Maintenance wise I believe one big complaint is the elevators (2 of them plus a freight elevator I believe) -- One sounds like it needs serious work.   Mechanical wise I believe each floor has new HVAC equipment, modern data connections etc.  (This should have been updated via the specials tax each owner is paying)

Have thought if you could get the electric company to install separate meters for each floor that would probably alleviate alot of the tension there.

I know this is a lengthy post - commercial is something that has always caught my eye and I've had great interest in.  Have not completed a commercial deal yet -- like I stated was close and have spent hours and hours of due diligence researching commercial.

Would appreciate any insights -- hey, maybe someone reading this would be interested in partnering with me.  Lots of risk but I believe lots of upside.  

I didnt read through all of this thread - however I have done the same when the stock market was tanking -- the company fund my employer was maintaining managed to lose no money so that was a plus -- however I was tired of the consistent 0% return and took a loan out for some investment real estate.

It might vary from company to company on the terms - however I'm sure most is set by the IRS --- what I've found out is that you can take out the max of 50% of the value of the 401k or $50k whichever is less -- 5 year payback period for anything other than the purchase of a primary residence (they will give you a 10 yr payback period on that)   

One caveat I recently learned about on the $50k max loan -- is that when you look back the trailing 12 mos, you can have had no more than $50k outstanding.

SO maybe this will make sense -- I used my 401k last year as a temporary short term loan - needed cash quick to redeem a property - so took $30k out to complete the purchase in cash when partnered with others funds.  Was able to get bank financing for rehab and to pay back my 401k loan within about 45 days so paid the $30k loan back.  Recently I found another good deal - wanted to take out the full $50k as a downpayment (which I'd pay back quickly with bank financing) however was unable to do so and would have only been able to take out $20k until 12 mos had passed since the loan balance returned to 0.

Hope that makes sense and maybe gives someone a little insight into how this works.

Lots will say not to do it -- I did and it worked great for the short term.  I wouldnt hesitate to do it again.  Only cost me $75 for the loan fee from the 401k administrator (and I guess whatever lost gain in the 45 days the money was gone - however the stock market did not go up more than the 3 or 4% interest I had to pay to myself during the time the money was outstanding.

The company I work for will allow 3 or 4 loans outstanding at any one time.  However the lending limits are what I described above and sound identical to another poster in this topic.

If you are still pondering financing - something you might look into.  I've done some homework on this list and called around to some lenders on a project I was looking into.

https://www.fanniemae.com/multifamily/dus-lenders   Youd get way better terms than any of the local banks would provide - however lots of hoops to jump through.  However the prepayment penalty and how they figure it is something I havent fully wrapped my head around -- I havent spent the time yet to find the formula on how it's figured yet.

I've used Quicken Rental Property Manager and it was so awful it led to my quest of finding new software and eventually leading me to Buildium a few years ago.

RPM is absolute garbage.

Noah I'm from Wichita as well and a little late to this topic if it's still relevant for you.

However based on what you describe Buildium from my experience will meet most of your demands.  As far as managing a rehab project - soliciting bids, managing drawings etc - I think it could be done but you'd have to be  a bit creative.  I'm in the process of having my own public web domain built -- www.setterrealty.com for pretty much the very things you are doing.  It will tie in with the buildium site.

I've been playing around with Buildium's financial tools a bit more and it's more powerful than I think some are aware of -- of course it all hinges on how accurately and timely you keep the books/accounting.  However as I've told others - once it's set up it's fairly easy.

Regards

Shane

I am a HUGE buildium advocate -- www.buildium.com

I've used their software for a few years now - have 4 units that I manage and all pay rent online through Buildium.  Only .50 fee per transaction.  The way I market the property and structure the lease all tenants have paid online - none have elected to mail their payment though they have the option to.

If you are used to another system it will take a while to implement - however it's fairly intuitive.  A friend of mine who is quite a few years my senior and in his 60's signed up a year or so ago and loves it for managing his rentals.

I am not a paid representative of the company - simply like the product that much. 

Income/Loss statements for tax purposes take less than a min at the end of the year provided you have performed your book keeping/accounting correctly.