All Forum Posts by: Brett Peters

@John Fish I have a client who owns about 18 rentals in the city and he hasn't had any trouble with vacancy or receiving rent payments. However, I am not on the ground in the specific areas you mentioned so I can give a evidence based answer to that part.

@Dexter Derr I sure can. The forum regulations won't let me post contact info, but sent you a connection request so I can get it over to you.

@Prab C. I would recommend Capital Lending Corp.

@Dexter Derr I am in Lancaster, Pa. I know a few lenders personally who may be able to help. If you want to go with someone more localized I would try a commercial mortgage rather than a bank due to the current lending environment.

@Pau Kha You could try piecing this together from platforms such as Loopnet and Crexi and your local Auction websites. That would be some of the only ways to my knowledge without having MLS access.

@Derek Magdziak I will assume here that this is for you to potentially purchase. As you know, a vacant building has a lower market value then one that is occupied. If you are trying to determine value for what the property could demand once filled, then yes you would have to develop a 'projected' pro forma based upon market rents in the area. After gathering a data set you can then make a prediction of value. However, I would not use this information gathered to determine your purchase price! For one, you will be negative cash flow day one. Secondly, you will no doubt have an abnormally high down payment. What you really want to do is determine the value "As-Is"...raw land and improvements because that is what your buying. The easiest way to do this is to get an appraisal. There are ways to do this yourself, but it is complicated and time consuming. Another option you would have would be to make filling a few of the vacancies as part of your agreement and using that income as your starting point for determining value. 

@Bellman Tumasang Commercial apartments start at 5 units. First, find out what the average price is for a building in your market. Let's say 250k, lenders will use an LTV or DSCR, whichever is lower, to determine loan amount. For simplicity, let's just say the lowest of the two is an LTV of 75%. This would mean your down payment would be 62.5k. You will also have to account for closing and loan costs so let's say all in you have to bring 70k to the table. To add, the lender will want to see that you have some type of reserves. All in all, in this hypothetical situation you would want to be liquid about 90k-100k to make the situation ideal. Make a savings plan based upon your numbers, deposit into it monthly, and make sure the account is interest bearing. You can then find out how many years it will realistically take you to hit your target. If it is too long for your taste, than you will need to either increase your deposits or lower you target property size. Best Wishes!

@Dave Wittnauer I am a commercial specialist from the PA area. You have put forth a really great question. The good news is the valuation of the building is not that difficult. Let's start with the easy part. Find out when is the last time it was appraised, and factor in the average appreciation rate in your area. That should give you a starting line. However, if you want drill down further, then you have to determine the net operation income, and multiply that by a market cap rate to arrive at a value ballpark. (If you are not familiar with these concepts, the easiest way to determine value is to simply pay for an appraisal). Also, in order to reap the highest price, you should make sure no units are empty and that the property is in decent condition. Value in commercial real estate revolves around the income the property is producing. To add, if the capital gain was reported in the deceased's estate then the liability for them taxes do not transfer to you. But it wouldn't hurt to consult the tax matter with a CPA. No legal advice given. I hope this was somewhat beneficial and I wish you the best of luck!

@Shay Reddy This a very good topic but a very stressful situation. I and the rest of the people in retail feel your pain. To start, I am going to assume your tenants have the force majeure clause already in their leases. If that is the case, the exact wording of that clause is key! Even though the clause has been around for some time, Covid-19 is very new and it has to be proven in a court of law that the clause actually applies to the pandemic. Not all the clauses are identical and in many states tenants have been losing their cases because either the language was too broad or too narrow. It is also pertinent to remember this clause does not excuse them from paying rent but rather delays their obligation to pay. My question is are they trying to leave or stay? If they are trying to leave, you will have to take them to court for the rent due and the judge will have to rule on the clauses validity. If they are trying to stay, then you have many more options. The bulk of which is in restructuring the leases. There is an infinite number of ways to do this, but I would recommend blending and extending. In other words, give them amnesty from payment while they go dark and tack those missed months onto the back end of their lease. In this way you would in theory maintain the integrity of your NOI. So if you are in a case where you have to sell or refinance, your property value won't be impaired. I stress the fact that only a judge can decide if force majeure applies, not the tenant! As a disclaimer this is not legal advice, and you should consult an attorney. I hope this helps.

@Lisa Eckman Respectfully, purchasing through an LLC is a 'commercial' transaction and is thus accompanied by conventional financing. The terms of which vary significantly, it does not have to be a certain term and does not have to have a balloon. To answer your question, you will have a slightly higher interest rate for sure because this is a business transaction. To add, the lender will focus heavily on the NOI, as well as the occupancy rate of the property, and then take into consideration your experience as an investor. Now, keep in mind that the LLC owns the property and the two of you will simply own partnership interests in the LLC not the property. This is important because each party controls their own interest and disagreements can arise. Also, it can make doing a 1031 exchange a nightmare. Partnership interests are excluded from being exchanged, so one person would have to drop out of the LLC to form a tenancy in common in order for the exchange to take place. All in all, a CPA is your best resource for this matter. I hope this helps!