All Forum Posts by: Brandon M.

I wouldn't call it a networking fee, but I have a different mindset than Chris K. It definitely can pay to know the right people,  even if you aren't the seller or the buyer/lender (or in this case lender and borrower/contractor).

It can be staged as a "consulting" fee or whatever you want to call it, if you can prove to both sides that you bring value by bringing two parties together then you can certainly ask for a percentage of the deal (albeit likely a small percentage).

I have been paid multiple times by bringing a lender and a borrower together, whether it is a few points at closing or whatever. You could offer to help the contractor with small simple construction tasks if you have the time, things that are easy to do/learn even if you have no construction experience.

Do you have your real estate license? If so you could help bring the deals, analyze them, find comps, etc.

There are definitely ways to still get paid on this, you just have to be creative and show both sides why it is a benefit to have you as part of the deal. I just wouldn't expect to get rich through this since you won't have any of your own skin on the game or be putting in much sweat equity.

If you network with the right people you can still find ways to make a few bucks.

First thought, be careful when working/partnering with family and make sure everyone is on the same page in terms of roles/responsibilities/profit split ahead of time. Do not just assume both sides know how the profits and responsibilities will be split. Otherwise you risk ruining a relationship over money, happens way too often.

It can still work, and could be beneficial based on your existing friendship, but don't let money ruin that.

I agree with @Jim Farrell , if he is loaning you money at 3% for 30 years why aren't you doing more deals with him? Keep him happy and find more deals to take advantage of that rate!

Eric,

Let me first say that is a nice "problem" to have, I think quite a few of us are quite jealous that you have been able to acquire that amount of passive income.

Have you looked into getting a HELOC and using some of the equity in those properties to acquire more cash-flowing properties? You definitely have a great opportunity to leverage the equity in those properties to acquire even more, so as long as you buy more positively cash-flowing properties then you should be good. But as with any other property, you want to make sure the new properties are good deals and meet all of the minimums discussed on the forum (2% rule, 50% rule, etc). You just have an advantage because you can offer "cash" once you have the HELOC.

Jody,

To follow on to what Hattie said, here in FL I have been told they only allow a "roof-over" once before you have to peel up the shingles and lay new ones, so those rules might vary per state.

I think my next step would be to re-visit the property with a licensed contractor who could help you accurately value the rehabs need and give you input on anything that appear to be possible unpermitted add-ons. That way you can present to the sellers the honest numbers of what the house is worth. Like Hattie said, the numbers are the numbers and if he wants/needs more than it is worth, you just have to wish him the best and move on.

As long as you can convey the numbers to them in an honest/sympathetic manner, hopefully they would appreciate your honesty. If it is something that you can't make work you could always suggest a short sale or anything else you think they could do. It makes it tougher when you let your emotions get tied in here (in this case your sympathy towards the ill father and the true desire to help someone), but if you can't help you can't help.

Honesty is the best policy.

Gabriel, welcome to BP. Lots of good information on here and lots of knowledgeable investors you can learn from.

To help you I am adding in the keywords Tampa, St. Pete. Lots of people have keywords set up to alert them when someone mentions a word such as "Tampa", so you will likely get a lot more responses from other locals using that, since for all intents and purposes you are in the Tampa/Brandon area.

I am on the other side of the bay from you in St. Pete/Clearwater, and have found BP nothing but helpful since I have been on.

Good luck in your future endeavors.

The one suggestion I would make: Don't tell the bank giving you the HELOC that you want to use it to acquire more property. Some banks aren't fans of that, so just tell them "property improvements" as the general reason.

When I got mine, the mortgage broker taking my application just said "I will pretend I didn't hear that" when I told her I wanted to use it to buy more real estate.

This is great info. I have checked into rates of the competition almost directly across the street. Competitor has security gate and an office, but I have not checked to see what percent occupied they are. They want $77 for a 10x10, this building I am looking at charges $45. So some small rent increases could be easy to do while still staying the more cost effective location.

To use specific numbers, I am planning on offering $90k cash, quick close. Have the cash but also have a small community bank willing to do 50% or more financing. Currently the building has 28 of the 37 units occupied, with 6 of the 9 vacant units being used by the owners. Given the current low rates and mix of unit sizes, if everyone was paying on time the rents received per month SHOULD BE $2075.

My first goal would just be to get all current tenants paying on time every month, no "pay me when you can" payment plans like the current owners do. I would also get all signed up with rental agreements. Between that and properly marketing the property (creating website, putting website and phone number on the big sign on the main road) I think I could generate enough leads to fill the existing units. The unit is located on a road with average daily traffic of 30k cars, 1/2 mile from road that gets 50k+ cars a day.

There are a few other similar facilities within a 4 mile span, none of them have websites so I will be contacting all of those today to see what their rates are and get an idea of occupancy.

Thanks @J. Martin , I mentioned the replacement cost as a possible other alternative way to calculate a true value because the records used for the income approach were so sparse. Since starting this post I have received tax returns but those show losses of 24k in 2012 (12k rents received, 36k expenses). I can already tell some of the expenses were fluffed up higher than true costs and I am sure they don't show cash received as part of the rents received.

That was essentially my original question: replacement cost or income approach in this scenario? Even if I had to kick out all tenants and start again, there is no way you can build a new 6500 sq ft block construction building under $20/sq ft.

I will likely "anger" Bob Bowling but I plan on offering the seller a low cash offer, quick close, (they are not even using an agent), and buyer paying all closing costs. That way they can just sign over the building, hand over the keys, and sail off into the sunset (the seller's words, not mine)

Will keep everyone posted how it goes.

Eric,

It obviously has potential to be worth the time/effort/money to flip, but I still think you need to underwrite it just like you would a new purchase that you don't already live in. What you can buy it for, plus estimated upgrades, subtract that from the ARV. If you can buy it at a cheap enough price then sure.

There is the benefit of already living there, you won't have to carry the cost of a mortgage/rental AND the debt on the rehab. Other than that I still think you need to run it as you normally would.