buying a note- slam dunk deal

[Francisco Tejada]

I would like some feedback on an opportunity that was presented to me by a lawyer that I was interviewing to be a part of my team.

buy a 650K note at 10% interest on a multi-family mixed use building.
the owner has defaulted on the note and it was accelerated
the note seller is asking for 350K

exit strategy #1
foreclose on the property and flip it. the RR is 80-100K so will easily sell for at least 800K. we turn 350K into 800K

exit strategy #2
current owner will find a way to pay the accelerated loan and stay in the property. we turn 350K into 650K.

Let me say that I do like this lawyer so far, he is an investor himself (obviously) and he professional and courteous. He was recommended by others at a REIA meeting. Should there be any concern on my part that he is both the lawyer and a partner in this deal?

Besides that I would really like feedback on the deal itself. What am I not thinking of? What could go wrong? It sounds like a slam dunk.

[G. F.]

Originally posted by David Breitzmann:

1. Judicial foreclosure, used primarily in NY state, may take up to two months.

In New York? 2 Months? No Way!
The fastest I have seen them make it to foreclosure sale in NYC is about 8-9 months and that's if you don't have a lazy lawyer. Foreclosures in New York take on average 13-14 months; and those are the ones that aren't being contested. If you have a savvy owner of a commercial property with representation, then we are talking 18-36 months.

I am not an expert in apartments or mixed use, but there is more to purchasing a building than just rent roll. You need to know the condition of the property. Some questions that I would need answered before considering a purchase like this is

How old is the roof?
How old is the boiler and what type of fuel does it use?
When was the apartments last updated?
Are any units rent controlled or rent stabilized?
What is the overall condition of the building?
Who owns the note (bank, private lender)?

If the property in located in nyc, use these four resources to get a better idea about what you are purchasing.

First,
The City Register where you can view the mortgage on the property, who sold it, who purchased it and who financed it
http://a836-acris.nyc.gov/Scripts/Coverpage.dll/index

Second,
NYC Department of Housing Preservation and Development (HPD) where you can check on complaints and violations. This usually can give you a pretty good idea on the condition of the building and what the tenants are complaining about
http://167.153.4.71/hpdonline/provide_address.aspx

Third,
NYC Department of Buildings - Also has complaints from HPD and also building altercations and any fines that were handed out
http://a810-bisweb.nyc.gov/bisweb/bispi00.jsp

Fourth,
NYC Department of Finance - Check out taxes, unpaid taxes, appraised value, unpaid fines, number of units in building, owner, etc...
http://webapps.nyc.gov:8084/CICS/fin1/find001i