All Forum Posts by: Carl Cheung

They as in the daughter of the owner who manages the building. I'm not sure how well versed they are in the trust details but it makes sense that it would be due to the step up basis so if there's a way I can approach them to give them a solution to that, that would be great. 

Hi all, I have an office in a building where it will go on sale once the owner passes. They said it is in a trust and structured so that it can't be sold until the owner's death? I'd like to approach them with purchasing the building but I'm assume they're not wanting to sell it until after the owner's death due to the step up basis.
I have first right of refusal but what type of creative financing can I offer so that we agree upon a sale and price beforehand? Thanks

 Thanks Carolyn! Good to know. Yes, we would plan on having it as our home for a long time but always good to know the tax implications if things change. It's still very early in the thought process but when I get to the point of asking an accountant I'll circle back to update you. Thanks!

Thanks Alexa, yes definitely would still run it like a pure Airbnb which I've looked into a bit. Great points, that's one of the reasons why I want to build...to get a good layout. I definitely want to insulate it as much as I can, or at least situate it so that there's no "loud" areas above them at night. I'd also be able to use the place for friends/family when they visit.

Thanks all. Yes I understand the idea sounds good. I'm more wondering about the tax implications/savings. Would the portion of the house being used for STR qualify for depreciation? Write off the cleaning, furnishings, part of the utilities, etc. still apply? What other possible tax issues would I run into, say if I decide to sell it later? Thanks again.

Hi, wanted to see if anyone has done this and what I have/haven't thought of yet. I'm in a HCOL (Seattle) area and looking to build my "final" home.

I was thinking of building a home and have part of the walk out basement used for STR. I'm hoping this would help offset my mortgage/buildout since it's in a central location and likely easy to rent out.

Would I be able to depreciate some of the buildout of the basement since it'll be for STR? If so, it would also be easier to self manage and so I can use it to offset my active w2 income instead of going for REPS status.

Appreciate any insight, thanks!

Thanks all.

Yes I thought that the need to update it may be "built in" the $/sqft but seems that there needs to be additional accounting for that.

If I were the owner/operator, I would figure to move the business to a more visible location since I think that would have much more upside with bringing new clients in so I do need to take into account the need for updates/ability to lease to new tenants. Thanks again!

Thanks. How would that change if I were the owner/operator? I may possibly take over the business on the lower floor.

The current lease for the lower is about 48k annually and they are saying it's a 6 cap. Thanks.

Hi all, I'm interested in purchasing this office commercial real estate in Western Washington. There's a small medical/dental business on the lower floor (~2k sq ft) and an upper floor (1k sq ft) that sits empty. Its asking price is 800k.

I understand there's some ways to come with a valuation 1) cap rate 2) comps 3) build. The selling broker seems to be valuing it high since the building next door is larger by 2k, larger lot and sold for $1 million. I hired a local broker and he pulled some comps and agreed that it was a good offer. But if we're looking at the cap rate/income that changes since the top floor is not leased, and the building has not been updated for a long time.

1) How do you take into account the building being old (1990) and hasn't been updated?

2) I understand that having it leased is an important factor. The comps could have had long leases that I don't know about. How does the top floor not being leased for a long time affect the valuation?

3) The lease for the business below ends next year. The current rate is possibly a little higher than comps, especially since it's a medical/dental business, so in the future to lease it out, the new tenant would likely want lower $/sq ft for longer term.

4) How do I make sure my broker is representing my best interest?

I'm sure commercial real estate is pretty localized and my broker knows the selling broker and are currently working on a different deal (not together).  My broker walked through the building with the selling broker and talking to me afterwards he mentioned the "potential" $/sq ft the units could rent for, which were the exact same numbers the selling broker had for his cap rate valuation (which I didn't share with my broker). Thanks for any insight.

Hi, I have an opportunity with a friend who plans on flipping a house ($500k purchase price), rehab $50k, ARV $800k. I would be a silent partner putting in ~140k and he'll get a construction loan. He has done some spec builds and some flips and I trust that he will make me whole if things go south. Having said that though, it's always wise to have some protection. I plan on consulting an attorney but wanted to get some thoughts and get a better idea beforehand.

He mentioned doing a JV with 15% return after 6 months and that will go to 20% if it takes more than 12 months to finish. It seems that JVs are typically 50/50 since as the capital partner I am taking the majority of risk.

1) What is the best way to protect myself in case it goes south/the timeline drags on?

2) What if I'm only a 1% ownership? It seems that helps mitigate any liabilities for me in case anything happens? But what does that mean as far as my asset protection

3) Since I'm in second lien position, is it common to add a personal guarantee/collateral assignment? 

Alternatively I could do a promissory note with a personal guarantee, which I understand better. Here in WA, usury law states I can't charge more than 12% unless I use a broker.

1) Can I just not add a "closing" point of 3% to make my 15%?

2) What are the reasons a rehabber would choose a JV instead of a HML? Seems like they would keep more profit doing the HML route.

Thanks, appreciate the insight!

Hi, I have a friend looking to purchase a new construction home in the LA area. Wondering if anyone had any recommendations on who they personally used that they would highly recommend. Thank you!