All Forum Posts by: Christopher Telles

In Los Angeles high grade mutlifamily are trading sub 4%. In Santa Monica one of our higher end markets a larger building complex sold at + $500,000 per unit. Admittedly I don't know the CAP rate as that was a private sale and the numbers have been confidential.

I've been getting properties going on the market in midtown and the upper east side NY and the numbers are surprisingly strong. Full 6-12 story walk ups with maybe a couple of units of street front retail are asking 3.5% CAP's.

It's a crazy time to be a buyer in some markets. A lot of the deals I'm seeing in Los Angels area where the CAPs are low are price for the HNW individual to buy and hunker down and earn something above CD's while they execute on a preservation of capital plan.

As real estate investors though we just need to continue to search for and find deals that put money in our pockets at a risk/reward return that is appropriate for the market and our individual circumstances. LA isn't Pheonix like Fargo SD isn't Chicagoland. They're all different with different market dynamics, unique rental characteristics and probably different investment yields.

In this case I would say its a double negative deal. One you're going to save on the downpayment, but you'll also have a negative cash flow every month from day one. And two, with the age of the building you're not covering your self with the CapEx.

I've owned extremely old buildings, stuff goes and its usually very expensive to fix. Installing a new water line isn't the same as replacing one in a new constructed building. Construction techniques, and materials used often make it difficult to replace plumbing. And power is just a whole other story.

I buy primarily commercial buildings, industrial and office, so I'm accustomed to negative cash flow going into to a deal (many are vacant) but I also know they're going to deliver positive cash flow after the preplanned vacancy period when they're finally leasing up.

I might suggest going back to the seller and hammering a deal that allows you to have several hundreds of dollars of positive cash flowing at entry.

Sometimes free is to costly!

 Where are you in the process of fund raising. Have you had a 506 (c) PPM drafted by a securities attorney? That's the document you would need to provide to potential investors before raising funds. Has it been properly filed with your states secretary of state/department of corporations?

Raising private capital from investors is a regulated enterprise, and not following the rules and laws that govern the activity can get you into serious legal trouble.

Sounds like a great opportunity to add value. As for the exterior and especially the window line. You might consider adding a small flower planter to the bottom of the windows if you can also figure out how to get a water line to them from your irrigation system. In addition, you could add small canopy's to the top of the windows for aesthetics and also as a sun block.

Through both you will get alignment of the windows, some vegetation or color from the flower beds, and added aesthetics for a relatively cost efficient price.

I agree with @Gilbert that earth tones might work really well with this very low rise complex particularly since you're wanting to avoid installing grass.

@Gilbert Thats seems to be one heck of a good find. Have you used them before? If so what was your experience? Any details in working with them would be greatly appreciated.

I will have to agree with all the others that the utilities are the issue. You should look into the cost of separating the utilities, but equally important whether that is customary in that market. Maybe all rentals come with utilities paid? idk, but you should before proceeding. 

 These are sound concerns, and each should merit review. On the opposite side of the spectrum though the 4 Vs 5 units can quite possibly turn out t be a financing blessing.

As for the story, yeah the story. Story properties always seem to make for the best investments, and when they don't you're often entertained by someones wild fairy tale. Listen to the story carefully, and if it isn't in black and white were you can read it too then chances are it was crafted to entice and lure you in as a character to the story. Don't become a character in someone else's story.

If the lease is month to month and it's a commercial lease there is often a lease holdover provision that allows for a hold over rent that is x% over the base rent. In AIR leases, the most common form leases used nationwide, that provision is at 150% of base rent.

If your lease does have a holder over penalty provision you could use that as leverage to enforce prompt payment of the "base" rent.

Otherwise I agree with the mention by another that if he's not willing to renew the lease and pay his rent on time then you'll have not choice but to employ the service of a towing service to monitor your parking lot.

FYI, most commercial leases, unlike residential leases, have a grace period of ten days.

 Now if I were looking at that deal I would make the offer at $100,000 and in an addendum to the offer list the fines due the city for whatever the violations are (try to get something on City letterhead that states the violations or the fines) and attach those to as exhibits. 

Then once you have it in escrow get that figured out or walk from the deal.

Look the sell here is you are saving the bank money. They would have to shell out $300,000 to recover a part of the outstanding debt. They're not going to spend more than they'd receive to fix a property problem. Simply put they would rather take the loss before spending money.

You're providing a benefit to them which is the way you should be looking at this situation. It's doubtful any other buyers will approach this deal unless they know about what you know and have to audacity to take that kind of risk anywhere closer to 300k:

The real way to get this done is to educate the broker and guide his thoughts as to why you are helping his client by buying this property. Compensation goes a long way in motivating people. Maybe you can suggest a buyers premium payed to the listing broker for x % if the deal is accepted. x being 25% which is more than s/he would earn if they sold it at $300k.

That's good discipline which is needed to be a successful investor. 

Here is a direct quote in the email I received last week from an agent I submitted an offer to for a small office building:

"Hi Christopher

I received your offer thank you. However I don't think its for the one I have listed, You are offering $275,000 for a property that is listed at $600,000. Please let me know if this is correct.

Thank you"

I don't get offended when my offers are rejected. Often time is my biggest ally.

Stay disciplined!