All Forum Posts by: Marc C.

Thanks, Jay. 

Isn't that true of ANY lease-option opportunity? So you're basically against the concept in general, not just for this property?

When I lived in L.O., I made a killing on lease-options of SFRs. Never did it one for commercial though. 

I like it. Expenses of 45% and vacancy of 5% are realistic. Sure, it depends on the market....everything is different in SFO, LAX, PDX, SEA and the Northeast mega cities. For non-coastal markets, however, it's a good rule of thumb. 

 Agreed! use 40-45% for expenses, actual local vacancy rate, and go out shopping. 

Sorry, posted that above as an addendum to my post:

The monthly lease payments will be equal to his current mortgage payment plus 1/12 of the property taxes and 1/12 of the insurance, paid out of 3rd party property manager's account from rents collected.

Roughly $12,000/mo. 

Fortunately, the contract calls for a $250,000 breakup fee if he defaults. 

Appreciate your comments! 

Thanks, Steve. Yes, Fannie and Freddie are the two biggest lenders in multifamily. Rates:

http://www.crefcoa.com/apartment-rates-main.html

But I've talked with local lender as well. They'd be interested in financing it now, including the repair/upgrade costs, but the seller won't turn loose until at least 2018 due to tax implications. 

The monthly lease payments will be equal to his current mortgage payment plus 1/12 of the property taxes and 1/12 of the insurance, paid out of 3rd party property manager's account from rent's collected. 

Congrats on saving so much at a young age. Most of us here wish we had done what you are talking about doing when we were in our 20s. SMART! 

Property taxes will go up when the ownership changes...budget for it. Maintenance will dramatically depend on the existing condition of the property. Never hurts to over-budget there. If you decide to move (meet the Girl of Your Dreams and get married), you may need to pay a property manager; 10% of gross rents is typical. Does it still cash flow with all these figured in? 

Don't skimp on the mechanical inspections! Know what you are getting into. Try to get the seller to repair what's broken.  

Many Property Management Agreements have a 30-60 day cancellation notice, which is fair. What ISN'T fair is a 1-year cancellation requirement, but I'm sure most of us here are too smart to limit ourselves for a whole year to any one contractor of any type. 

Here's a thought, though: I have heard/read some advice to maintain more than one property manager (if one has more than one property in a given market) in case one stops performing, changes owners, etc. 

If you do switch, deposits will be transferred from Old PM to New PM in accordance with state law. 

For a bigger picture outlook on fundraising in general (not necessarily securities laws), I am reading and enjoying an older book, "Rich Dad's Advisors: OPM: How to Attract Other People's Money for Your Investments--The Ultimate Leverage . Paperback, April 20, 2005". 

The best $7 I've spent recently. Doesn't "feel" dated at all because, while securities laws have changed a lot in the past 5 years, the concepts about using and getting OPM are very, very valid. 

In the end, "Your Network is your Net Worth." The key is networking to meet millionaires, which isn't easy and is very time consuming. Once you have a little experience with deals, then listing your next one on one of the crowdfunding sites seems like a good way to go. It's amazing how many multifamily deals are raising big $ on RealtyMogul, RealtyShares, etc. 

Thanks for your input, Zach. Yeah, kind of what I'm thinking, too. If everything doesn't go right over the next 3 years, attracting investor capital for the down payment will be impossible. The risk of losing not only my option consideration, but my improvements, is therefore pretty great. 

But here's hoping we get some input from some other investors as well. 

Have a Happy New Year, and thanks again. 

Marc C.