All Forum Posts by: Chris Winterhalter

@Account Closed

Awesome job! Get that GC and scope of work set up and go do your next deal!

@John Horner

Anything Downtown Cincinnati send my way...but ONLY Downtown Cincinnati. It sounds like you just specialize in SFR's but if you come across a multi-family in Cincinnati 20+ units please let me know.

@Zigmunt Smigaj

A 3 year ballon could be fine if you had the cash for a commercial loan to begin with (25% down). However even if you had 25% down available and went with the 10% down deal the seller is offering you would need to make sure your value is accurate. If you didn't properly value the deal (or manage it properly in the first 2 years) then you could be in for a world of hurt. Let's say you bought it for 500k with 10% down. You are not going to amortize the loan at all during the first 3 years to build up any equity (22-23k @ 5% & 30 year am).

• 500k with 50k down for a 450k loan.
• After 3 years call the loan amount 427k
• If the property appraises low...let's say 350k at a 75% LTV refi you would need to come up with 165k (427k-262k). Value is the key part of this.
• As it's already been pointed out the deal doesn't cash flow either.

Like @Wayne Brooks pointed out the property is probably way overpriced. Just because you can get into a property doesn't mean you should. A lot of seller financed deals don't pencil out right now based on where we are in the market cycle. Low interest rates, high rents, lots of capital in the market, and hungry buyers make most seller financed deals over priced right now (for multis).

@Account Closed

As the owner of older multi-family buildings I have ran across this issue and been involved in several large insurance claims (100k+). You can get replacement value policies depending on the insurer. Many of the companies will not touch the building for anything less than cash value however there are a few out there that will underwrite for full replacement cost. Though the policy cost might be astronomical. If you have documented upgrades that will help. It sounds like you went with the replacement cost policy which is great if it fits within your budget. Make sure loss of rents insurance was included in the policy as well.

Actual cash value policies can hurt you on a loss when truly factoring in co-insurance and depreciation. I went through an extremely long battle with an insurance company on a large loss. I eventually got what I wanted however it took close to 6 months.

Most of my current policies are now functional value policies. Basically they will handle a loss like a replacement policy however it caps at the insured value of the policy.

@Account Closed

What size property and transaction amount are you talking about? Under 2-3MM reach out to local and regional banks. Above 3MM you start to get into the capital markets, CMBS, Life Insurance, Fannie/Freddie multi-family loans. You are not going to be able to get a pre-approval letter from the bank for a 5+ unit building. You might be able to get some type of documentation from the bank however 5+ units are different than 1-4 units. Compile a one page resume/cover letter when submitting offers on these properties and include a proof of funds letter with a sufficient amount of capital. For local and regional banks speak directly to the bankers. Do not use brokers especially if you are financially stable. Talk to local multi-family brokers and see who is funding transactions in your area. I would imagine there is a lot of appetite from local banks in LA right now (and most other large cities).

If you go above 3MM or to the capital markets (CMBS, Life, Fannie/Freddie) you would speak to a highly reputable broker that deals with these types of loans.

Good Luck!

@Brian Anderson

Generally commercial landlords will offer some type of TI (tenant improvement) money to the prospect tenant as a concession as it is generally common place depending on location and tenant. This money will go towards the build out of the space. This money will have to come out of your pocket. Also leasing fees are generally paid up front. They can be substantial depending on the length of the lease and total lease amount.

Good luck getting a commitment from a bank on the refinance loan before you start construction. It will be next to impossible and even if you get a term sheet (I doubt it) it would come with so many clauses that it wouldn't be worth very much. Unfortunately you are going to have to make the judgement on your on based on your conversations with bankers. Be EXTREMELY upfront about your financial situation and the property. This will help yield the most appropriate answers. If you are vague or don't give them a clear picture you might get a lot of (that shouldn't be a problem if everything looks good). However if you are more upfront you will generally be able to gauge your future ability to refinance. Some banks might (I stress might) look over your personal financial situation as a courtesy.

In regards to the 18 months...the project rehab and lease up period might take this long when factoring in seasoning. Your first deal with a local/regional bank can drag on especially if you are not well capitalized or lack experience. Good luck!

@Rob Pene

Small world! I didn't put two and two together in regards to our conversation last week. I'll shoot you an email to discuss.

@James Wise

Severed bird head or human head?

I'm looking for an excellent web designer for my real estate and hotel construction businesses. I have the domains I just need a solid webpage built. I've worked with oversees designers in the past with mediocre results (I got what I paid for). Any suggestions for designers that have worked with real estate or commercial construction companies? SEO might be important for the construction company but not needed for the real estate company. I use Elance from time to time but wanted to reach out to BP first.

Thanks!

Chris

@Jared Kott

You haven't called enough local banks or credit unions. Your situation is difficult because of several reasons like you pointed out however many local banks might not love the location of your properties and deal size (small spread across many deals). Local bankers are great at crushing your spirit especially when you are newer (and more seasoned). When I first started in multi-family I got the same push back from local banks and credit unions. It took me 18 months to refi our first 12 unit property (that was also 2009) and so many no's it was like asking a super model to your prom dance. You need to push through to find the right bank. Talk with brokers that work in that area for suggestions. Network with other investors that are working with local banks in that area. Talk to the insurance brokers that insures rentals in that area (they know the mortgagees).

Also make sure you have everything extremely organized when sending financials and property information to banks. That can go a long way. One little thing can be off and an underwriter will toss the file. You can get around the seasoning requirement with the right bank, documentation of rehab, and fresh or renewed leases. Good luck!