All Forum Posts by: Thomas Fortune

Is anyone here building or rehabbing on the Outer Banks? I'm putting together a deal in Nags Head and would love to connect with someone who has a bit of experience in that market. 

Thanks!

In need of a little guidance here: 

The company I work for currently rents our office space, and we are interesting in purchasing the building we currently occupy. I'm exploring options, and think that a lease with option to purchase in the next 3-5 years may be the best bet, but I'd love some other opinions here. A little background: 

Goals of purchasing: 

1) Build equity. Any cash flow is icing on the cake, but not the reason for the purchase. 

2) Purchase with the lowest down payment possible. 

Building details: 

Built in 2007, two story class A building. 2 units total - downstairs is 4,800 sqft and currently rented at $5,768/month. Upstairs is 7,500 sqft, and currently occupied by the owners company. We believe market rent for the upstairs is ballpark $10,000/month. 

Based on these rent figures and expenses, the current NOI is roughly $125,000 annually.

At a cap rate of 7.75%, purchase price would fall close to $1.6mm.

Seller would like to sell, but is not ultra motivated and won't accept lowball here. 

Structuring the deal: 

We can likely use an SBA loan here and do a 10% down payment (160k). Additionally, the seller would likely carry a 2nd...but i'm concerned we'd run into issues with debt coverage at that point.  (would like feedback on this if i'm wrong here!)

That's what brought me to the lease option - If we can structure a lease in which a good portion (or all!) of our rent check each month goes towards down payment, that would be ideal. I've just never done this before, and i'm not sure where to start. 

Thanks for your help!

Wayne Brooks - your strategy is sound to me, and I'm implementing the same thing myself. A few notes I've learned from my deals in my market: - a Fannie Mae cash out loan is possible After 6 month seasoning - they'll cash out 75% of new appraised value (purchase price is irrelevant). - you can only do this with up to 4 mortgages. - if you find a local bank who is lending their own money, the rules may change. I've got a lender who will cash out 85% with no seasoning. This is a great strategy to jumpstart a rental portfolio in the few few years of investing , as you can recycle your cash over and over. Best of luck!!

@Dom Allen @Brian Huber - Hey Guys, sorry for the delayed response. Unfortunately this seller backed out at the last minute, so the deal never went through. 

For what it's worth - I put a great deal of thought into this, and here's my conclusion on wholetailing (for me and my market): If I want fast turnaround..

There's no way around paying 3% to a buyers agent. 

Yes, i could flat fee list it, but having done a separate deal recently in which things went sideways prior to closing, i'm reminded of how important it is to have a great agent on your side (and how important it is to pay your agent appropriately). I have a solid agent that I pay 2% on the sell side.

There's also no way around paying buyer closing costs - in my market, and for this particular house, paying $3k-$5k in buyer assistance is something I've got to do. 

So at the end of the day, i still need to budget for roughly 10% of the sales price in closing costs regardless of it's a retail flip or wholetail deal. These are simply the costs of doing business, and need to be budgeted in for this type of strategy. 

hope that helps!! 

great info - will keep you guys in mind.

That's only 100/month for the policy, which is roughly what I pay for similar policies in my area. The non-refundable thing is typical for a short term like that...

I've always been a full-rehab guy, never done a wholetail deal..but this came across my desk over the past few days:

Purchase price: $98,500

Retail value (in as-is condition): $125,000

ARV with medium rehab (base finishes): $140,000

I'm thinking I'll close, do about $1k in basic make ready repairs and put back on the market targeting the $125K price point and call it a day.  

With this strategy, I see no way around paying realtor fees and potentially some closing costs (this neighborhood is heavy towards first time buyers). Is that typical for those who do a lot of wholetailing? Am I missing something?

Agree with @Darrell Shepherd - try to find a niche or two that's less competitive. In my market I can rarely buy 3 bedrooms off the MLS - i'm in a military town with lots of landlords willing to pay a premium for 3 bedrooms, which makes it impossible for a rehabber to compete. BUT, I can buy 2 bedrooms off the MLS, because there's a lot less landlord competition for those.

are you actually looking for a primary residence, or is this just something you are willing to do to make the deal work?

If you actually want/need a primary residence, the deal looks great in my opinion. A lot of the holding costs you outline can be considered a normal part of living, and not exclusive to this investment (if you own ANY home, you'll have taxes/insurance/etc.).

If you don't really want/need a primary residence, then it's a tougher call. You could wait for the first look period to expire and then submit a true investor bid. Of course this opens you up to potentially losing the deal to other investors who are also likely waiting to bid.

Dev Horn - going the branding route, how much are you varying your post card creative / messaging from send to send? I like the branding strategy as well, but trying to figure out that balance between CONSISTENT messaging while still having FRESH messaging...