All Forum Posts by: Christopher Telles

 In a long term lease of this nature getting to value is only part of the equation. There are lease terms that can and will potentially impact the direct financial obligations/benefits of the land owner, and you wouldn't want an appraiser to provide guidance on these matters. 

If professional guidance is needed the best resources would be an accountant to look at long term financial analysis, perhaps assisted in the negotiations by a good real estate attorney, but maybe because of a professional predilection its my opinion a good experienced commercial broker will deliver the most benefit to the landowner.

If going the broker route a good way to insure you have a quality experience broker representing you in the transaction is to seek out a broker that is a member of either SIOR or CCIM. You'll be able to find these brokers by searching for brokers having this designation on the respective website of each organization. Just google the acronyms and you'll see their websites pop up.

There's no doubt that hard money rates and points are stratospheric especially if you're accustomed to borrowing on conventional terms from banks. I too have been looking at using hard money for some deals, and have talked to at least a dozen HMLs over the last sixty days. I don't have direct experience working with this HML but @Chase Maherhas made a compelling case in our conversations where I would seek him out early in any deal I was shopping for money. I don't know if they lend outside of So Cal but perhaps he'll chime in here and provide you some additional guidance when shopping for HML money.  

 Couldn't agree any more with Steve's recommendation of the book The Millionaire Next Door. While published sometime in the mid 1990's the numbers in the book may no longer be relevant, without adjusting for inflation, the precepts in this book literally helped me to see what changes I needed to make if I wanted to become a HNW individual.

I studied, read, and re-read this book so many times there was a point in time me I would actually see the day deference in money choices laying out before me in advance of making investment/expenditure choices. Fortunately, it helped me to reach my end goal. 

 Flow chart definitely helped! And I agree with @Ryan Dosseyyou're a good sport for reading the feedback, and then instead of getting pissy showed us all up by producing an awesome and easy to read explanation.

Now to answer, if you have a buyer or are the buyer you need to respect the contract you signed with Bob, but you also need to communicate with Mike since he's ultimately the seller, and as I remember says he doesn't know Bob.

I would put Mike in contact with Bob, and have them resolve whatever their issues might be before going under contract, or at least build in a contingency that the respective parties need to resolve issues of representation within X number of days.

Isn't real estate fun!

When the appraisal is done and Chase delivers their update to you make sure your aware whether they include a cross collaterilazatiin of the two properties. You do not want that as it increases your risk for both properties should some life altering event impact you and or your wife moving forward. 

I've seen banks come back and say "well the value we were looking for wasn't quite met" and then suggest that they "might" consider overlooking this if both properties were used to secure the loan.

Sorry, I got lost on the 2nd Bob. A story like this almost needs a picture board, or at least a well formated piece with paragraphs, numbered lists with alpha sub lists.

Imagine how much of a mystery man X is to all us who can't follow one very long paragraph.

For the typical investor this doesn't work. You need to also add 5% for management (at a minimum) plus at least 2% for maintenance.

Every investor is different but true NOI includes the above and it's more like gross rents X .19 = NOI

Personally I used a 20% expense base to get a snapshot view of a properties NOI assuming I know the actual rents or use market rate rents on a proforma basis.

 If your not real familiar with understanding and reading easements, and a lot of agents aren't either, then you might consider sitting down with your title agent (or get the listing agent to provide you with the title company they intend on using; s/he may already have a preliminary title report) to get help in understanding the easement/issues.

From the photo it looks like the white road would service the property. Your preliminary title report would tell you whether the property Provides you an ingress/eagress easement which may be reciprocal to: a) the roadway property (b the property in question and c) all the properties adjoining the roadway (and possibly in the development.

Once you've gotten to the point of figuring out who owns what and what land is encumbered by an easement to whom then you'll also want to try and find out if there is an operating and maintenance agreement on file with the governmental agency that issues the original parcel/lot approvals.

And to answer your question, yes developers create separate roadway parcels and depending on the time either keep ownership with an operating agreement dictating use and maintenance (and perhaps paying property taxes, deed them to a local government (although without a requirement for maintenance (sometimes) or make them part of an hoa.

I bought the property, and worked through tracking down ownership, getting lots splits and correcting the easement and creating an operating agreement for maintenance with the neighboring property owners that also benefited. We collectively paid for the lot split engineering and legal expenses while I talked title company into doing their part as a complimentary gesture. I front the capital to complete and then issued  receipts to the other property owners, broker it down on a prorata basis per parcel, and then they reimbursed me. 

It was a commercial property and all the other property owners operated businesses from their properties. I also got the property owner of the entire other half of the driveway to join us in the easement and operating agreement. In addition, I fostered the idea to replace the street that was in very bad condition and built a fund so we could all pay into which everyone did with an estimated timeframe within five years.

I found a contractor hungry for work who agreed to do the repave at a price (just happened to be the amount we had in the funded account) and had it replaced three years later.

The repave added substantial aesthetic properties to the street and each property. I sold the property to the tenant who never originally had interest until I improve the building (new roof, new loading doors, new paint) and fixd the street. It helped them buy it knowing the rent would increase by more than 50% when their lease expire if they wanted to stay.

I've been in this situation before. You have three options I see as of now. 

1. If you want the deal make it and close. Then attempt to correct the issue (see my comments below).

2. Make your offer contingent in the seller resolving the issue.

3. Walk and find the next deal.

Depending on the physical circumstances of the property you can attempt to get title by prescriptive easement. Each state is different in this procedure so you'll need to check with your state, but in a best case scenario it'll take you years.

You can also work with a real estate attorney to either force the heirs to grant an easement or get a lot split proportionate to each property needing ingress/egress and through the process create an easement for such.

To find the original developer go to the governmental agency building or planning department having jurisdiction over the property and ask to see the historical files for the subject home and the parcel/lot approvals for the remaining lots in the development. If they still have those records on file you should be able to trace the developer family down.

You might ask about releasing the acquired property from the LLC as the break in chain of title might be an issue to keep the 1031 in compliance.

I'm not an expert in 1031's it's just something I picked up on reading through your comments.