All Forum Posts by: Simcha Davidman

@Kyle Davis a couple thoughts jump out at me.

Is seller requiring some sort of personal guarantee? In other words, if the tenant vacates now or after the lease in 4 years, can seller only go and take the property back or can they go after you and your partners personally? I'd be very wary of the latter.

During due diligence, try to speak with high-ups at the bank, the people in the real estate/lease department and figure out if they've determined that they are moving out of this location. It's entirely possible that the seller has information that you don't. And banks as a very general rule are moving toward less brick-and-mortar.

It's hard to say that the building will appreciate almost 10% in 4 years. Does the lease have rent escalations? But that's only part of the equation. On these buildings, your income is only as safe as the tenant. If the lease expires and they move out, your building is worth pennies compared to the $5.8m. Of course, a renewed lease or a new tenant would change all that. I simply mean that just because the tenant is paying X amount in the last year of a lease does not mean that the building is worth the typical cap rate multiple.

Good luck!

@Michael Flood unfortunately, I can't answer most of your questions with any certainty, so I will pass on just throwing out anything. But for your last question, I've generally had success going to small local banks. Just walk on in, if you're in the neighborhood. You should be able to sit right down with one of the loan originators and chat them up, build rapport, and they'll see that you're a real person.

Fine, I will say from a lender's perspective, they don't like when you just sign up everyone under the sun. I'm also not sure what benefit there will be to you having more than one prequalification letter. They're all pretty much based on the same thing - and they all pretty much mean nothing in terms of their actual commitment to give you a loan. I say get one, and if that's not enough for a high enough loan amount, you can talk to another. But it probably will be fairly similar in result.

Good luck!

@Jason Collins if I'm the landlord and I knew that he was only coming for the season - which is now cancelled - I'd probably be happy with 2 months, or maybe try to negotiate up from there a bit.

I think it'd be different if he was already there for several months prior to this happening.

What say you?

@Jon Mason you can always lawyer up, just for advice and to see if there's anything for your to do at this point.

If you don't want to do that, but have some time to do the leg work, I recommend two things. First, look back over your deed and survey from when you purchased the property and see if it says anything. If you have anything to do with your back neighbor (assuming I got the story right), ask him also.

Then, I'd go to the county clerk, or wherever they have land records in your town, and tell them about your situation. Most of the time, the people that work in these offices are a gold mine of information, and if they don't know, they should be able to point you to your next stop.

Good luck!

@Jasmine Moore any time!

The two contractors and property manager would be a natural start.The pm definitely, and likely the contractors too, should be well connected with local investors.

Once you give up equity, you will not get it back. But consider it an investment in the future - with this deal under your belt, the cashflow you'll earn, any equity you keep,and the connections you make will all be worth more than any one deal will give you.

That being said, try to keep as much as possible. For example, don't offer more than someone would need/want to help you (how you would know this is a different question :) ). Don't negotiate against yourself. And the first person to talk in a negotiation loses, almost always. Be ok with quiet, and allow yourself time to think before responding.

@Modtrice Ford welcome to BP!

I recommend reaching out to the broker for the financials. Then you could start getting a picture of what's really going on (taken with a grain of salt, of course). Do you have some sort of model/calculator? It's very useful for quickly punching in numbers and spitting out rough projections.

And yes, residential mortgages would not be available on a property this large. You'd have to go commercial. But, there are some very attractive loans you could potentially get. There is not much room to go around a 15-25% down payment, and that is a lot of money. But if you don't have it - and the deal is good - find it somewhere :)

Good luck!

@Jasmine Moore welcome to BP!

How do you know it's a great deal? Feel free to post more info here and people will give their opinions on it.

Raising money is about building trust while building your network.

Who/what type of people did you reach out to? I'm hoping it was people with experience. You may have to give up (a lot) of the equity on this deal, if you don't have the money, credit, experience (I'm assuming on this one), ability to raise money, or ability to get a mortgage.

But don't stop just because someone told you no!

@Simeon Miller thanks for correcting me! I didn't know that - never really gave it any thought, actually - but it makes complete sense.

Does it apply even for retirees no longer stationed anywhere?

@Frankie Lesowske aside from the general apprehension of the legislative/political climate of a government that would curtail free enterprise, I'd be concerned about the ability to push rents = raising value of the property. Aside from SFRs, your asset value is determined by NOI, and if you're limited on how much income you can bring it, it could limit how high you can drive your NOI. It is possible that the rent control in OR is loose enough that it won't be an issue for you. I'm not familiar with it to comment on.

@Weston Espinoza welcome to BP! And, I guess, congrats on your first deal!

I'm sorry you got burned like that.

1. Work with people you trust and get it all in writing. If you are hesitant about trusting someone, it's usually a good enough reason to walk away.

2. It really depends on what you're trying to do and what you're agreeing to. It's hard to give a blanket statement on what to put into a contract unless we know what the contract is about. One thing I will say about contracts though, is that if there is something you don't understand, make sure you have someone on your team who you fully and completely trust and who uderstands it. If you don't (to both of these), don't sign it. If and when push comes to shove, you will have no leg to stand on if you say, "but you (counterparty) explained that this clause means X" when it's written to mean Y.

3. It's also hard to recommend specific things to educate you on your mistake. I'm not even sure I see such a huge mistake. What it sounds like happened is that you brought a good deal to your employer, who essentially took it from you (maybe this was part of your plan?). Then, he didn't have the funds to do the work, so you bought it from him. Were you relying on being paid by him for the work? Did you pay anything the first time around when he bought the properties? Perhaps if he was in a bit of a pickle you could've negotiated to pay him less. I may have misunderstood your story.

Good luck!