All Forum Posts by: Christopher Telles

Basically looking for a creative solution to get this deal done....he is open to negotiation on the price....I was thinking of trying to get ONE loan for the 80% LTV, and have him seller finance the rest, but I think he owes $470,000 on the property.

Other option would be to get a private investor to put money...any thoughts?

Hi Chadd,

You might need to do some more research on this possible deal. First, in order to assist you in looking at the economic on this deal you'd need to provide much more information so that the NOI is a known commodity.

Second, getting to a point of understanding how you can finance this deal would be to also understand how the seller must close this deal. What specifically does he mean "two closings"? And, what is meant by "two bundled mortgages"? 1st/2nd combinations, wraps he used to buy these?

Third, you might provide us with what you think the value of the properties are after you've bought them from the seller. Is there upside in buying these? Or are you simply buying them for their existing cash flow.

All this cumulative information is important when trying to figure out whether or not the opportunity you are looking at is a viable investment, and how then the finance it if it is a good opportunity.

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If he's the real estate agent in the state of the property and it's his client why is he (and also you) relying on zillow for valuation? Something seems amiss. You also mention you've accepted a deal at 75% LTV, LTV of what? Zillows price? Zillow isn't a reliable source for values. Zillow's values attempt to deliver market value. That being the case how's is the a good deal, and why is a quick closing needed? If you want substantive feedback on whether this is a fair deal you should provide economic details. As for buying together. You can create an Llc to buy the property together or form a joint venture agreement if you're comfortable taking title as individuals vesting as tenants in common.

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You didn't mention how you might want to purchase the property, and as a community of investors the desired output will guide the action steps. Assuming you want to use a conventional buying process: First thing you'll want to know is how much debt the seller is carrying on the property. This information will let you know if there's any equity or if she's upside down. After you've determined the debt level look at sale comps in the direct area to see if you can determine the homes value, ask an experienced friend to help you if you don't know how to evaluate comps. Once you know the value and the amount of debt then you'll have the nuts and bolts to make her an offer. What you offer is up to you just make sure you build in contingencies to conduct due diligence (yes, even though you live in and are familiar with the house) and get financing. Assuming you want to buy the home with very little if any cash: Use all of the above to determine equity and debt. Then use that information to structure an offer where you are either assuming or wrapping the mortgage with the seller carrying all or the bulk of the sellers equity in the form of a note. Remember the seller needs to have some incentive to sell. If it's a straight push between you renting and her selling to you there's not much incentive for her to sell. However, should your numbers kind of work out close to this (often they do) then consider incentivizing these seller by structuring her note where it is due in quicker time e.g. 5 Vs 10 years with a reduced amortization 15 Vs 30 years. Structuring a deal using a combination of the above might get you the deal, and if you can afford the higher payments on what would he your primary residence it would also help you reduce the overall interest you pay over the term of the loan and help you build equity in the property. Best of luck!

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Originally posted by @Dave G.:

@Jim Viens

@Christopher Telles

Thanks for the responses guys. Now would this deed look any different than the others? I'm heading down to the recorders office after viewing it just to look over documents associated with the property, and others.

No it won't look any different. It will either be a Warranty Deed or a Grant Deed (if in CA), unless there is a specific reason the lender were to use another type of deed.

The "deed in lieu" just describes the process of a property owner electing to voluntarily give a deed back to the lender in "lieu" (instead) of foreclosing on the property. It's not an actual "deed".

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Originally posted by @Rick H.:

@Christopher TellesWho is Mark?

What are you using as the collateral?

If you're trying to buy the asset, you need a seller to be able to pass marketable (incurable) title. This means they need the capacity, power and authority as record owner or fiduciary.

I did a number of loans to heirs secured by the beneficial interest however I stopped in 1993 as it occurred to me that there were better ways to work these files than loans on fractional interests. Also, offsetting creditor claims, grumpy attorneys, disputes among heirs and outright fraudulent claimants caused me to re-think the whole business model.

A Better way to chill a sale is to tie up all the equity, not just a piece.

Rick; I meant Rick but wrote Mark (Mark's in another thread). My bad, apologies!

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Originally posted by @Rick H.:

Many years ago I coined the term "pre-probate" for real estate investors to understand that probate is (for the buyer) a title problem.

If you are contracting to buy the asset, CA laws provide for a summary probate for a gross estate date of death value under $150K. Advantages are that its typically simpler and can be faster than a formal probate, however it still requires noticing DHCS (Medi-Cal) and other creditors, so from a practical standpoint will require six (6) month for your seller to get thru court. Hopefully.

Downside is that the attorney represents client (your seller) and, despite you choosing the attorney, they must advocate for their client, not you. Consequently, you stand to lose some level of control.

Remember that after filing, whether a summary probate or a formal probate with full IAEA authority or limited powers, your seller will be solicited by others (maybe even me!). This means that your deal will be under threat by competitors. Also, if your seller cannot post bond and its determine one is required by judge, your seller will only get limited powers and your intended sale is now subject to overbid in open court.

Lots to know; lots that can go wrong, and much to learn about to control and work these deals. I've done hundreds.

Mark,

Great insight shared above, thank you.

Now, as an exercise, a hypothetical question that might help someone in the OP positions: if the OP (buyer) were to loan the heir (unprobated heir seller) a personal loan with a security guarantee of her interest in the unprobated estate (including the real estate) and then filed the personal loan in a UCC filing and also against the persons credit and filed a notice against the property with such claim guarantee then would that proactive action help the buyer to fight off potential other investors who maybe circling the wagon?

I am Imagine the loan of course would need to be small enough to take a gamble, but large enough to make other investors take a 2nd look.

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Originally posted by @Brian Adams:

@Christopher Telles, I currently structure my deals under a 506(b) offering. As you probably know you can offer your deals under this Rule to those investors whereby you have created a preexisting relationship. You can take on an unlimited number of accredited investors and with this type of offering you are limited to 35 non-accredited investors.

Personally I have not yet marketed my deals under 506(c) where you can advertise and solicit broadly using platforms like social media, tv, radio, etc.

There are unique rules to raising money under these different provisions so make sure you know the nuts and bolts.

Just to give you my opinion and I am glad you formatting your investor document, but unless you are a practicing securities attorney, make sure before anything is given to an investor or filed with your state you seek legal council to ensure your documents have all the I's dotted and T's crossed.

There is a lot of money at risk here my friend and you don't want to shortcut preparing your own documents to save a couple dollars only to get in trouble down the road by the SEC.

Regarding splits - each deal will vary as each deal has its own unique exit strategy, returns, hold period, etc. If you haven't done a deal yet there is a high probability you will need to give more of your deal away to get started to establish your track record. Having a small piece of a deal is better than not having any piece at all -would you agree?

So if you have plans to grow your business with large multi's and you haven't done a deal yet, use your first deal where you will need to partner with someone as the springboard to bigger things.

I appreciate the response. Although I am formatting the document it is a document I had created several years ago for a similar purpose but did not proceed. It will get proper legal vetting.

I'm an experienced value add investor in commercial real estate primarily industrial, but also including office and retail. Deals we've completed have been acquired using my own capital (we being my wife and I).

In addition, as a CRE entrepreneur and professional I've owned and operated four large/small brokerages, and a development company. 10MM+ sq ft of transactional experience.

Now the impetus for looking at raising capital is mainly due to the chainsaw accident (the not to Great Recession) which severed a very important part of this real estate investor e.g. Capital.

I've been thinking about beginning with a Simplified JV and offering a 7.5% preferred return and a 25/75 split on deals I'm sourcing and turning around by fixing whatever issues prompted the value add component through completion and exit, but where I also have no skin in the game. This is for relatively quick turns of a duration say 6-12 months. Not necessarily fix N flip like SFRs but in some respects similar. Smaller capital intensive deals that have been leased under market or have been mismanaged, have physical issues, etc.

When my capital is in play too my thoughts are to take a promote of 30% and whatever my share of the capital contribution is at the time. This would be for longer term holds of 5-10 years. Again, offering a 7.5% preferred return and transactions that target low 20% IRRs.

In the two scenarios above my concern is that I might be biting off a lot of work for to little compensation.

My calculated cummulative historical IRR on investments has averaged 34.4% IRRs.

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Originally posted by @Brian Adams:

Ryan, I flip 1 to 2 houses a month and I use this platform to bring private investors in for multifamily deals.

Why?? because it establishes a track record with the investor. I can do a flip and have the investor money back in 6 to 8 months. It creates a level of trust, they get more comfortable with doing deals with you.

When you are raising money for large apartment deals, you are not asking someone for $20 bucks - but asking them to invest a significant amount of money like $50k, 100k, a million.

It is awesome that you are having success with singles. Another suggestion is create an executive summary of your deals. Your before and after pics. Depending on how you financed the SFH's, get investor testimonials, get referrals.

This will help you build up your pool of potential investors to do large apartment deals.

Brian,

Love to hear stories of people believing in themselves to take action and then taking measured risks to move up the food chain.

I would enjoy hearing a bit more about how you're structuring your capital raises? Are you using Reg D's (what type), JV's, did you create a fund? Equally important, how are you structuring your splits with your investors?

I'll assume your acting as the General partner if a LP, or the managing member if an LLC. I'd also assume as such you're the one securing the debt.

I'm working on formatting a Reg D 506, actually working on the document now, but have not formalized its creation and registered it in my state because the split issue is something I'm concerned about when approaching potential investors in my network. Would rather go to potential investors with a solid investment opportunity on par with generally accepted capital raise exit/cash flow splits.

I've read everything from 10% splits with waterfalls from very large institutional type fund raisers to 50/50 pari passu splits from localized individual investors. Obviously, everything is a process of negotiation, but my network is important to me. Your feedback on this issue would be insightful.

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Originally posted by @Mark Ainley:

@Tristan Cortez

I can argue this one both ways.....multi family vs SFH and I do own/invest in both in Chicago. The one fact that excites me about SFH and pushes my mind away from Multi Family is with a SFH your appreciation is never maxed out by a Cap rate. A SFH may appreciate much higher because an owner occupant may be willing to pay a much higher price based on the desire to live in that house in that area down the road and with a Multi Family your increased property value is capped by the standard rtn that type of asset may be getting at that time in that area.

I would tend to agree with your sentiments in general. However, one of the best ways to circumvent the CAP rate dilemma is to buy value add or opportunistic multifamily properties. These are not always readily available, but when they become available they could turn out to be terrific buys.

I've always focused on value add and opportunistic investments in commercial, but having developed an interest in MF recently I've started to uncover more and more MF value add properties in the markets we're focused on for acquisitions.

Buying them requires more hands on commitment other than simply management, but the value enhancement can be significant.

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You've already received some really good advise in this thread. Having trained 100+ commercial agents as owner/broker/manager of a large national brokerage company I can add to the conversation about key points you'll want to ask/know about when interviewing brokers. In my opinion, the most important thing you will need to know before agreeing to work with a company is who will serve as your mentor, what their production is like year in and year out, what the mentor will get out of the mentorship, and most importantly meet and spend time getting to know the mentor before signing up to work with/for s/he. Here's some additional stuff In order of importance: 1. Training. You should ask what type of training will be provided as part of your agreement to align your license with this company. a) Ask for a thorough explanation of what the training program entails, it's length, and who is doing the training. b) ask them to show you the training materials. c) ask about the production of the trainer currently or when they were producing if they're now only managers. d) ask to meet with the sales manager if that's a different person than conducting the interview. Best if luck!

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All Forum Posts by: Christopher Telles

Christopher Telles has started 4 posts and replied 357 times.

Post: First Deal - Complicated - Need Some Suggestions.

Post: Business formation

Post: My own house?

Post: Foreclosure proceedings dismissed without prejudice

Post: Title transfer/deed names

Post: Title transfer/deed names

Post: I quit my CPA Job to buy Large Apartment Buildings

Post: I quit my CPA Job to buy Large Apartment Buildings

Post: The best case for buying apartment buildings ever!!

Post: Finding the best sponsoring Broker.