All Forum Posts by: Charles Lucenay

I am located in Houston and have found a portfolio of 116 townhomes (all grouped in the same community) for $9,000 per door. I think they would rent for $500-$700 per month, it is a wide range due to some different room layouts. There are some repairs that are neccessary but I think I could get that rolled into the loan and it shouldnt be more than about $3,000 per door (max).

Those are good suggestions. Thanks!

I am a newbie at residential investing. I was looking at 2 townhomes that have been foreclosed. They were builder foreclosures and are almost complete (probably 90%). I was considering purchasing them finishing them out and then leasing them. I am curious as to where you all think the best places to find tenants is? Also, how do you go about locating a tenant prior to purchasing and closing on the property. I have heard that a lot of lenders want you to have the tenant lined up prior to the purchase.

I dont know about apartments but I know on shopping centers and office buildings this is generally done so that the seller can artificially inflate the price because he gets to capitalize the income from the master lease even though there likely isnt anyone actually in the space. Developers were bad about doing this a few years ago. They would master lease a center for a year up to 100% occupancy and then the buyer was left holding the bag after the first year. If you are buying the property based on the master lease income I would run away from that deal. If it is a tenant that is coming in and leasing and then sub-leasing the space then I agree with Jon just make sure they are strong enough to make the full payments.

A few years ago there was a financial tool called cash flow monetization that could be applied to NNN leases signed by credit tenants, does anyone know if that kind of program is still around?

I agree with Craig for the most part however I would say that a car wash should be up near a 15% CAP since you are buying more of a business than just a real estate investment. Given that fact your risk is increased and therefore the return should reflect that higher risk. It is the same with hotels, generally since they are sold as business rather than "leased" properties their CAP rates are higher.

I agree, I used to work in construction management and getting a rough estimate from a local architect is the way to go. They can at the very least ballpark a price for you.

I am a broker so take this with a grain of salt but you might want to look at hiring a commercial broker (not just a broker who does residential and commercial but one who specializes in commercial only) to represent you in the purchase (typically they are paid by the listing broker through a co-op fee, if not then you could just write their commission into the offer) their knowledge help you in evaluating the deal and they would not have any kind of fiduciary responsibility to seller so they should be able to give you an honest assessment.

I dont see that there is much benefit in investing in residential and then moving to commercial, you are not going to really learn anything in residential that is going to help you in commercial because they are so different. That being said financing for commercial properties is not near as aggressive as it is for residential so you actually have to come in with some money. One needs to be very careful that they know what they are getting into with commercial because you can definitely lose your shirt if you dont. However with the right strategy you can make a lot.

I would also vote commercial investing, largely because of the longer term leases. The downside is that you cannot increase rents as quickly as you could if you were leasing houses or apartments however for me the overall appreciation and stability is stronger in commercial investing so that is why it gets my vote.