All Forum Posts by: Chris Winterhalter

@Victoria Winters 

I'm heavily involved in hotels, currently on the construction front but have quite a bit exposure to the investment side.  Actually one of our goals this year is to develop an extended stay or limited service hotel for our portfolio.  We will see if I can pull it off!  

It's a very exciting CRE property type however it's also very challenging. Most people don't just jump into hospitality. Most players in the industry have spent their entire careers dedicated to hotels/hospitality. I've been very careful to jump over the investment side even though I'm very comfortable with investment real estate. It's extremely operator driven & local demand generators can make or break the investment. Just like other CRE property types the hotel business is a small circle of individuals & companies.

With that being said I would think about your goals.  If you really want to pursue hotels then I would lay out those goals, figure out why you want to transition/diversify into hotels, and then figure out what your role will be within your investments.  From there you can figure out who to start networking with.  Think about hotel professionals/owners etc in this breakdown:

Hotel REITS/PE Firms - Larger firms with good sized portfolios, generally just handle asset management but could have separate divisions depending on the company i.e. management etc.  

Hotel Owners/Ownership Groups/Developers - Could be a single owner or a smaller firm that will generally own all of their portfolio or will be the sponsor on all deals and have significant equity.  When an ownership groups grow they generally form a management group.  

-Hotel Management/Development Companies (they may have an equity stake in their portfolio or they may only handle 3rd party management).  It's very typical for a hotel management company to invest sliver equity into a hotel deal to get the management contract and to have some skin in the game (5-10%).  They will make fees on management, consulting, development/sponsorship, etc.  

-Hotel Brokers - Hotel brokers are generally not under the big name brokers, there are a handful of specialty brokerage firms that just handle hotels, motels, casinos.  They will find you the deals & potentially help you secure debt financing.  

-Hotel investment banking, debt/equity placement, commercial brokers - the debt lenders, some can help with equity placement but this is more difficult.  They will generally specialize in hotels only or just a few other property types.  

-Hotel Consultants (consulting & valuation) - they will handle feasibility studies, appraisals, & potentially some outside consulting.  

-Hotel Design & Architecture Groups - handle design, architecture,  PIP review, ADA compliance, potentially procurement.  

-Hotel construction - Generally a speciality contractor understanding hotels, brands, PIP's, production work, fast paced schedules, etc.  They will handle some or all of procurement depending on the company.  Some might have architecture and/or design in house.  

It's actually an excellent question, hotels are very interesting and I often wonder how I would have jumped into the industry without exposure through our construction company.  It definitely takes dedication, especially now as the hotel market is heating up.  Good luck!  

Hey @Randy Benglan any update on the potential hotel deal?  

@Jeff G. 

Like many have mentioned it may not be necessary to issue a receipt for a cash payment.  I've never collected a tenants rent (all my properties have been managed by a PM) however I think it's good practice to issue receipts for all cash payments.  No matter what you do be very consistent (the IRS likes consistency).  And on the expense side make sure you keep all records, i.e. canceled checks, receipts, invoices (not just CC but actual itemized receipt), plus copies of bank & CC statements to back them up.  If you don't have evidence of the expense it can be tossed by the IRS.  Congrats on the new property! 

@Antonio Cerqueira 

You should be able to find the local capital markets team that deals with multi-families.  There's probably a few teams that handle most of the large transactions for the players in your market.  Even though you don't need to go local with a broker it's much better to find the experienced local team in my opinion.  They will understand values in your area, investor appetite for certain deals, and will be well networked.  Generally they call themselves a Commercial Banking or Multi-family Mortgage Banking company.  Also capital markets, debt/equity placement (although sometimes the equity placement is nonexistent) etc. etc.  Ask your syndicator contacts who they use.  Good luck!  

@Alick Patrick 

"One member suggested to buy cheap properties in good areas, fix them, and then generate both good rental income and equity"  

Haha, maybe they should write a book too.  In theory that's perfect.  But in practice it's generally not feasible.  Of course you can buy distressed properties in solid areas, rehab them, turn them around, & then generate solid income and equity.  However it depends on what "good" means for area.  Many areas are extremely hot right now and distressed properties are not selling at discounts.  Many of the areas that still have "cheap" properties are in declining, stagnant, & crime ridden areas with increased operating expenses and intensive management.  However I do think there's a happy medium between buying a high dollar rental and a 25k single family in a bad area.  But it also comes down to your goals.  When you are looking at lower price point properties, where are you looking (I see your in Torrance)?  I think buying a duplex, triplex or 4plex to live in can be a solid investment depending on the parameters.  If you were going to buy a house anyway, it meets your non-financial goals of owning a "home", and can meet some or all of your financial goals of buying a rental property (adjusted for owner occ incentives) then I think it's a potential wise investment.  Don't overpay, understand your rehab costs, operating costs, & exit strategy and you should be fine.  Then expand your portfolio after your first deal (potentially into lower priced properties).  Make sure the metrics are still good and that you're careful of buying in declining and crime ridden areas.  

Also on paper your operating numbers might appear to be the same however it's likely your operating expenses will be different compared to the 100k vs 500k duplex.  Good luck! 

@Toben B. 

Do you know if they have appointed a receiver or local PM company to take over yet? I would contact the PM firm as a first step. Larger local PM firms are highly connected with larger multi-family properties and should be able to give you the scoop. Have you networked with the local multi-family players in town yet? I would start doing that as well. CRE is a small world with a handful of players in each market. It will surprise you once you get connected in your area.

As @Wayne Brooks mentioned CoStar should be checked.  If it's already listed with a broker it should show up in CoStar.  It will also be able to provide you with additional information.  

@Antonio Cerqueira 

I am by no means an expert on potential niche lenders for foreign buyers of turn key properties. However what type of bigger deals are you talking about? The capital markets have a lot of availability to non-recourse loans (Fannie/Freddie Multi-Family, Life Insurance, CMBS). However a proven operator will need to be involved in the deal (either a 3rd party management firm) or someone with experience. Underwriting guidelines are more stringent and loan size requirements are generally 3-5MM+ but there are several small balance programs out there that go down to 1-2MM. I'm not 100% sure on foreign borrower requirements however I'm sure you could find the right program. Life companies can be more conservative and I'm not sure Fannie/Freddie multi-family programs will lend to foreigners. However if you (US citizen) are a partner in the deal then it might pass the requirement. The CMBS market might have a program that fits your needs (but fees can be higher on smaller loans). Good luck!

@Chan K. 

Okay just so I fully understand your LOC is in second position on your 6 unit? So you have an existing commercial loan in place on the building? Does the same bank hold the 1st & the LOC? You could have refinanced the entire transaction going up to the 80% LTV. That's neither here nor there. Continue to grow your portfolio and use the LOC wisely. It sounds like you have a solid plan in place.

And yes HML do not serve a purpose for multi-family properties (outside of very small units for short periods of time). Build your private lender relationships which can be structured with more flexibility.

Good Luck! 

@Micki M. 

To answer your question...I would only do business with them if they were making gender decisions in my favor....

All jokes aside that is ridiculous, it speaks to the ignorance of the lender.  They are probably still living with the same small town, old school mentality they grew up with...

Run don't walk....It's definitely not worth doing business with people like him.  

And like many mentioned, with the utmost class, carefully pass along the success of your deal after its completed.  

@Loren Whitney 

I don't know of any local, regional, or national banks that offer non-recourse financing for IRA's. Potentially a non-recourse loan on real estate if you had a stellar business relationship with a local bank with high revenue/income/assets depending on the industry (and long history with the bank). But that would probably depend on their regulators. And they would make your business sign the guarantee on behalf of the IRA (more than likely).

Beyond that the CRE capital markets have a lot of availability to non-recourse loans through life insurance lenders, CMBS, fannie/freddie (for multi-family). Loan size generally needs to be 5MM+ but there are small balance programs for CMBS, Life, & Fannie/Freddie down to 1-2MM.

You might be able to develop a relationship with a niche business lender offering this service for IRA's. Or you might be able to work with a specialized real estate lender/fund that wants to diversify. Just a few thoughts...