All Forum Posts by: Adam Byrne

Hi BP!

I am selling a Pennsylvania commercial multi family building to a long time tenant. We have a great working relationship and have agreed to terms ahead of signing a sales agreement which includes a 2nd seller-financed mortgage.

I have a lawyer who will prepare the 2nd note and take care of title and closing. The only thing missing is the sales agreement itself.

I don’t need an agent since I have a buyer and my other needs met. Is anyone interested in helping me fill out the actual sales agreement for a fee? PA licensed RE agent preferred!

Thanks,

Adam

Thanks for your replies. I conferred with my lawyer today who believes it’s a gross violation of ethics to demand payment before closing. In fact, in CA it’s a misdemeanor!

Hi BP!

My realtor in PA begged me to advance her several thousand dollars in cash before closing on a portfolio of properties in order to pay her personal bills. Due to some complications in closing, we only ended up closing on half of the properties, but she got paid the complete commission. 

Since the closing, she has not paid back the advance or reconciled the commission payment. 

I realize I screwed up by paying her. I suspect this is some kind of breach of real estate code of ethics; can anyone confirm this? Is she in legal jeopardy from this behavior?

Curious to hear what you think!

Adam

Thanks, Lane!

Unfortunately for employers, I'm not a great employee. Craving creativity and autonomy, I've had to make my way as a self-employed investor the last many years so I don't have any W2 income to cancel out. Mostly passive income from real estate activity. 

I love Hawaii. How are things going for you on the investment side?

Hi Alex, Thanks for the contribution! Since I'm a member of an LLC, wouldn't the depreciation loss flow through the K1 and cancel out the cap gain at the personal level?

I love you, BP!

Ashish and Michael, your responses are very helpful and corroborating, so thanks for that.

And @Dave Foster is my guy for 1031s. 

My immediate problem is that I'm closing today on my sale and that only gives me ~3 weeks to close on this depreciation-strategy property. Yikes!

Hi BP!

I'm evaluating a property that has had a lot of capital improvements and because of its location, are not reflected in the value of the property. 

I'm selling another commercial property and wondering if buying this new property and performing cost segregation for accelerated depreciation will help me offset the capital gains on the property I'm selling.

Questions are: 

#1) Is this a viable strategy to offset liabilities? (Knowing depreciation clawback will happen upon its eventual sale.)

#2) Does the purchase of the new property have to happen in the same calendar year to take advantage of the depreciation?

Thanks!

Adam

@Tadeh Vartanian

Thanks Tadeh!

An extensive appraisal is a requirement of the lender in order to close the financing. So I can back out of the deal if we don't hit our initial ARV.

My question is, is this a good deal to pursue?

Hi Jamie, we're outside of Pittsburgh about 30 min in Washington County. It's definitely Class C property, but in a safe town with rental demand. My contractor lives in the town and vouches for the salt-of-the-earth residents there. Otherwise, I wouldn't have thought to look here.

Hi BP,

I have a 14 unit mixed-use multifamily building under contract near Pittsburgh, PA. I've got a purchase contract for $48K. 

The building needs substantial mechanical upgrades, but the units themselves are in solid shape; they just need a quick paint and scrape. The building needs significant electrical rewiring, significant plumbing, boiler / radiator replacements or I can go electric baseboard heat, some masonry work and a list of miscellaneous items. My estimated rehab budget is in a range from $300K - $375K depending on some issues my sub contractors are researching. This would total an all-in amount of $350K-$425K.

I have access to a hard money line of credit that will pay for 75% of the ARV, so access to capital is available as long as the appraisal comes back positive.

The building has the potential to generate above $55K NOI (before debt service) which, in its market, could value the building at +$550K at a 10 CAP.

This ARV of $550K will give me the rehab budget and the purchase price ($412K) I'm estimating. There's a lot of risk with this rehab budget because we're dealing with the building mechanicals and an unexpected $25K expense throws off the numbers of the deal. This is one red flag for me.

I can break the building even by renting out around 9 of the 14 units, which seems achievable to me.

The building, once stabilized and refinanced could produce around $2,300 a month in cash flow or $165 a unit. Not amazing, but, it being a BRRRR deal, I can theoretically leave no cash in the deal after refinance.

Considering the high rehab risks and the relatively low profit per unit, would you do this deal? Why or why not?

Thanks!

Adam