All Forum Posts by: Angel Dejesus

Hello everyone! First timer here and this project is a doozy! It's a 5 unit (2 commercial, 3 residential). The purchase price is low ($170000) and has great cash flow, BUT it needs extensive work - $50k-$90k of necessary upgrades - HVAC (no heat!), $5000 emergency stairs off roof, electrical panels are currently 100A and need to be upgraded to 200A (among wiring upgrades), and a few bathroom upgrades (leaky/rusted fixtures for $3k-$5k/unit). Is this deal worth it??

We're putting 20% down. Using cash for remodels. Loan at ~7% for the difference.

PLEASE HELP!!! 

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If I had $1M to invest in real estate, I would ______.

 Why do you have to sell? Why not keep it. 

I have a commercial building that I bought for 800k last December. Currently doing a renovation on it. Reno will be about 650k. So, after I’m all done I will have 1.450m into it. Just got half the building leased and other side will be leased soon. I will be about at 220k Noi nnn once the other side is leased. Thinking of taking on bank debt instead of 1031. Don’t really want to sell. I wouldn’t have to pay taxes on the bank $ would I? How does all of this work on the back end? Usually I take a loan at the beginning so not familiar with it. 

Are you sitting on AT LEAST $50-$100k in CASH?

You’re talking about paying $1.6M, adding $100-200k in improvements to make it worth $1.9? (So you might be upside down after selling costs if you have to sell?)

Until then you have $3k income minus $4,775 to seller, (4% over 30 years), $3,990 to the bank ($600k @ 7%), figure $500/mo for insurance and another $500/mo for taxes? That’s $10k. So you’re bleeding $7k/mo if you pay cash for the repairs. Which have to be done before you get any rent increase. 

Honestly I can’t believe the seller is dumb enough to let you buy with no skin in the game as they will be in second position. They stand to lose $100k+ if you fail. (They won’t get to keep that $600k, the bank will own the property if they don’t get it back. But they’ll also be out all the selling and foreclosure costs.) On the other hand you virtually have to finish or bail, you can’t sell at a profit until then. And you can bail pretty much at any time without losing any/much money. And even then your dream is to make $100k? 

If you have nothing to lose if you fail get them to sign before they talk to anyone who knows real estate. If I couldn’t sell, and wasn’t using a realtor, I MIGHT take that deal with $160k from the buyer, but more likely $320k. Good luck for sure. 

Angel, this deal has potential, but there are a few big questions I’d dig into before getting too excited about that equity spread. Knob and tube wiring alone can be a major red flag it’s not just an insurance issue but also a potential lender roadblock, depending on the severity and whether it needs a full replacement. I had a buddy who picked up a similar deal with below-market rents, thinking it was a slam dunk.. until he realized stabilizing those units meant extensive electrical work, city inspections, and longer vacancy periods than expected. On the flip side, another investor I know in Boston was able to negotiate seller credits for code compliance, which saved him six figures upfront. If the seller is set on that $600K payout, will they entertain creative financing on the remaining balance? You could structure it as seller financing or a master lease option to avoid a massive cash outlay while you stabilize the property. Also, how far below market are those rents, and what’s your strategy for repositioning the units?

Angel, this deal has potential, but there are a few big questions I’d dig into before getting too excited about that equity spread. Knob and tube wiring alone can be a major red flag it’s not just an insurance issue but also a potential lender roadblock, depending on the severity and whether it needs a full replacement. I had a buddy who picked up a similar deal with below-market rents, thinking it was a slam dunk.. until he realized stabilizing those units meant extensive electrical work, city inspections, and longer vacancy periods than expected. On the flip side, another investor I know in Boston was able to negotiate seller credits for code compliance, which saved him six figures upfront. If the seller is set on that $600K payout, will they entertain creative financing on the remaining balance? You could structure it as seller financing or a master lease option to avoid a massive cash outlay while you stabilize the property. Also, how far below market are those rents, and what’s your strategy for repositioning the units?