All Forum Posts by: Zach Smith

Great post, Dan! As a Lender, I've seen all sorts of crazy stuff with flippers and builders failing to properly document contractors, proof of payments and lien releases. I've seen subs lie to GC's and literally commit fraud to hide the fact they failed to pay their material suppliers. I've seen flippers run into last-minute delays selling when the title company notifies them of the need for additional documentation late in the process. Detailed recordkeeping is crucial to avoid pitfalls. It's also valuable if the IRS ever comes a knocking!

@Chris Watkins Thanks for the shout!

@Chris Wilburn Would love to connect with you to see if I could be a good fit for financing quick rehab loans on fixers. I'm a local, direct portfolio lender through my family business, lending in OR and SW WA exclusively. 

@Chris Watkins thanks. 

Happy to connect to learn more and see if we're a good fit for you. 

@Drew Sygit makes a good point about Dodd Frank. I would caution anyone from jumping into private lending on owner-occ. There are reasons most private/hard money lending companies avoid it by focusing on business/investment purpose loans. 

Another idea would be investing in a Real Estate Debt Fund. Our Fund (near you in Eugene) has received a large influx of capital this year. If you find a private lending company with conservative underwriting backed by a Fund with good management, investing in a pooled fund can offer returns like you’re aiming for with less risk because your investment is diversified across many loans across many assets classes, locations, project types, etc. This is a far more passive investing strategy, but it can be a great place to park funds right now. 

@Amin Akhmadi

You were dead wrong about this deal. It was a great deal. While it did not come together for other reasons out of our control (described above), your basic assumptions were wrong. Appraisal was in. Over $600k equity on day 1, as-is. We projected 25% cash on cash return to us and our partners as complete. And trust me, we know what we’re doing.

I recommend you only chime in on deals you understand if you’re going to jump to the conclusion that something is a “shitcan” deal and tell a potential buyer to pass on an opportunity. Keep an open mind. Would be a damn shame if you found an opportunity like this one and didn’t look twice at it because you had a closed mind and couldn’t see the upside.

@Eamon Keating

Great question! We did entertain short term rental of the two new units we were putting in, but the city was not to keen on that idea as they are so desperate for long term housing.

UPDATE:

Well what’s the saying? Don’t count your chickens before the eggs hatch?

Minutes before closing we got an email from the county saying they could not approve the multifamily use based on the existing septic capacity. Gearhart is all septic. No city sewer available. The city gave us the impression they had county authorization when they approved the multifamily use. Good thing we checked because that was not true.

We found a solution though. We pulled in the state’s best wastewater system engineer to help us get authorization from the county. Just had to pull together the data showing the historic use as apartments and that the current system was adequate, document it and we’re off. We m got positive feedback from both the county and state dept. of environmental quality. We just needed about a month to follow their process and we’d be good to go.

We asked the seller for an extension to get that done. She refused. Her rationale does not make sense. She’s not selling it. She’s not running it apartments. Not as a true motel either. I guess she wants to continue being a slumlord with a non-conforming motel/apartment complex that needs a new roof and tons of other work. Oh well. We stick with what we can control. And we can’t control a completely irrational seller. We’ll ping her every now and then to see if she changes her mind. We’ll see. I’ll post another update if that ever happens.

I should clarify: Dan decided not to place an offer because at that time he had found a different investment opportunity that was a better fit for him. He said we could offer on it instead. After we got it under contract, we stayed connected with Dan and we all plan to work together on the project. Dan will be helping us out with some extra boots on the ground (he lives very close-by). 

Hi Bob, I do have an update!
Dan (the original poster) and I connected and went through the property together. After he passed on it, I and my business partner got the property under contract. We are still in DD phase, but have already received conditional use approval from the city to official convert to multifamily use. We'll be negotiating some necessary repairs and then looking to close in September. We're excited about this project. Should hopefully be a great investment for us and our investors once stabilized. 

Hi Daniel. I am a private/hard money lender through our family business Cetan Funds in Eugene. We have our own private equity fund and do a lot of business with multi-family rehabs, developments and hospitality. We only lend in Oregon. Our background prior to starting the fund was in commercial lending and commercial development. I can tell you we'd be very interested, and it sounds like you may be working with some preconceptions on loan structure. I just did a multi-family deal at 95% loan-to-cost because there was enough up-side and we had solid trust with the developers. Would love to connect and talk more. I'll send you a message.