All Forum Posts by: Andy M

People always say to think big and outside of your comfort zone, so I'm looking at a big office building in Syracuse, NY. Here's the basic scoop:

4.2 million asking
5 story, 105,000 sq.ft. net leasable area in downtown Syracuse.
Built in 1980. Renovated in 2006. Class A office building.

Currently there are leases of at least 3 years remaining on 45,000 sq ft for 520k/yr. I don't know the details of this lease; obviously I'll look much more into it if I go forward with this.

That leaves 60k sq. ft. left leasable. The selling realtor claims Class A rents (\\go for 15-22 $/sq.ft. So lets assume we can reasonably quickly lease 50k of the remaining 60k at 15 $/sq.ft. That gives 750k/yr.

So that would, at ~91% occupancy, give a gross income of 1270k/yr.

Now as far as expenses go, I don't know if the current or proposed leases are NNN or what expenses are covered, etc. Lets assume expenses equal to 40% of the gross income, or roughly 500k.

So our NOI appears to be 770k/yr. Lets assume a downpayment of 20% and a 7.5% 30 yr fixed mortgage on the balance of 3360000. That gives a debt service of 285k.

Then we're getting a roughly 485k return on our downpayment of 840k., i.e. about 55%. Looks good to me.

Now, obviously the biggest issue would be getting the area leased up. However, even if only 20k of the 60k of space gets leased at even 10$ /sq.ft., we're still at a positive cash flow.

What do you guys think? Worth some more investigation? If it turns out to indeed be good, anyone interested in partnering up?

Andy

Hi,

I recently bought, as my first property, a 3-family building that I am converting to condos in Cambridge, MA. Everything was going well until I got the floor plans done by an architect. The measured total area of the building per the architect is 2560 sq. ft., whereas the MLS sheet listed 2952 sq ft! I could understand a discrepancy of 2-3%, but not 12%!

Obviously this seriously impacts my bottom line. The MLS sheet listed the sq ft. source as "per public record", so on Monday I'm going to go to town hall and look at that public record. Any other suggestions? Do I have a legal leg to stand on here?

Andy

Hi,

I'm in the process of buying a 3-family and converting it to condos in Cambridge, MA.

I bought the place for 655k. Lets say i sell each unit for 330k and incur 120k in lawyer fees, closing costs, renovations, commissions, etc.

My question is then:

Say I sell only 2 of the 3, for a total of 660k. If I don't sell the third immediately, do i owe any taxes?

One might think that I haven't made a net profit yet so no tax. Alternatively though, we could say that if we split my costs between the units (a cost "basis" per unit) then I have made a profit so I owe tax.

I think the latter of the above is correct, but I wanted to check to make sure because if its the former then that would be great.

(I could live in the 3rd unit and sell it in 2 years to take the profit tax-free and in the mean-time I could take 80% LTV out of it to keep investing.)

Andy

Right now I'm doing two condo conversions in cambridge (one with my own money and one with another investor's). After these are done I should have roughly 350k to invest. I think I would like to put a piece of that toward a cash-flow property if I can find one, and keep the rest for another conversion. Lemme know if you have any good ideas.

Alas, none of those clubs are very close to Boston, and since Boston is such a different environment than the rest of the state, they aren't much use. Maybe I'll start one.

No, so far I haven't found any clubs in the area. I'd be happy to chat with you sometime though.

Hi all,

I'm in the process of doing a deal involving a condo conversion with another investor. I found the multifamily unit and will be responsible for doing the conversion legwork, while he will supply the credit rating and the bulk of the capital. We plan on forming an LLC, and for my efforts I'll recieve 25% of the profits.

Now, he wants to see the property for himself on Monday. My question is, what is the best way to protect my interests here (i.e. my knowledge of a great opportunity)? Will a "no-compete" form as I've heard about do the trick, or do I need something else?

I appreciate your help in advance, and if someone can actually point me toward a form I can download I would be forever grateful.

Andy

wexeter,

That was some very useful info, thanks! I'll be sure to bring up the issue with an experienced accountant/tax attorney here in MA. Funny how I've never seen that before and I've read a number of books which talk about it. I guess one option is for me to live in the last unit for 2 years to get the 250k tax-free bonus, and meanwhile use a equity line against the unit to continue investing.

Andy

Hi everyone,

I'm a begininng real estate investor in the Cambridge/Boston MA area. I would love to get in touch with other investors in the area, so give me an email or PM if you are nearby.

Anyway, I'd like to describe my first deal and show other potential investors that I've got a good grasp on the numbers involved.

Originally I was looking at buying a single condo in the Cambridge area. I'm getting a PhD at Harvard and thought buying rather then renting for 6 years was smart. However, there are NO condos of reasonable size (900+ sq ft) in all of cambridge for under 300k.

Noting this, I started looking at multi-family buildings. Fast forward 6 weeks, and I've just signed the P+S on a three unit, 3000 sq ft multifamily building for 655k. The building seems to be a real gem. All systems i.e plumbing, electrical, roof, heating, etc. have been updated recently and are in good working order. The building inspector and I agree that no major work needs to be done, expect for adding a "landlord" electric meter, cost ~1500. I plan having 1 minor construction task done: filling in one doorway to a cubby on the 3rd floor and then knocking down a wall from the master bed to form a walk-in closet, and then professionally repainting and cleaning the place. Meanwhile I will legally turn the building into condos. After the painting, etc. I will hire a staging company to furnish the first floor. Hopefully this will let me sell all the units.

Here are the numbers (in k):
Purchase price: 655, of which I'm putting 20% down and financing the rest
at a 6.5% 3-year ARM. The loan rate would jump greatly after 3 years, but I'll be out way before that so it doesnt matter. PITI cost: 3700/mo.
attorney fees, architect fees, title insurance: 7
painting, cleaning, 1 new dishwasher, misc fees: 6-10
holding costs for 2-4 mo: 7-14
Staging, misc decorations: 2

total cost: 676-688k.

Now, I've toured lots of comparable units in the area. Right now, my best estimate of a comp unit is 310k. My realtor agrees. Because we dont know exactly how the units will look when re-painting and set, and also the cambridge market can be pretty volatile, (the units will be on the market in roughly 10 weeks from now) I'm going to project a per-unit price of =/- 10%, ie roughly 275 to 340k.

Thus:
Total sale price: 825-1020
Commision (somewhat low, the realtor I am working with to buy the property said she would give me a deal if I also made her the selling realtor for the units): 35-45
Transfer taxes, attorney fees, etc: 12k

gross sale price: 778-963k

So we get a net profit of:
102-275k

Looks pretty solid. I plan on doing a 1031 exchange with the proceeds.

What do you think?

Andy