All Forum Posts by: Chad Kamerad

Welcome bud, happy to have you in the area. There is so much to learn here. Banks are not evil to be avoided, rather a tool to use with care. Take your time and choose carefully both your investments and your financing. I often feel in over my head simply because what I know now is just a drop in the bucket. The most important thing is that you start and learn from the results. 

Hi good folks of BP. I would like to ask for some wisdom. What are some differences to watch out for when owning commercial property. I have a good oportunity on a building in a good location in a town of 15000. One side of the building is rented from a title company and rents for 1600/mo. A year to year lease with a built in 2%/year increase.  The other side is vacant. It is set up for a hot dog or sandwich shop and previously rented for 600 (way low for the space). The investor who owns the building has moved to the east coast and has been selling all of his midwest investments. Before it goes on the market he made me an offer of 109k for the property. 

I would like to get some opinions on the deal as well as advice on what to expect moving from residential rentals to commercial.

Thanks in advance for giving me your valuable time and wisdom.

Chad Kamerad

buying new homes to rent is a good option IF it can be profitable in your area. Keep in mind after several years your expenses are going to jump because things will start failing at the same time since they all were new at the same time. If you decide to sell in 5 years it may not be a concern. Newer homes tend to attract a better quality tenant. Just remember to Screen Screen Screen. I would advise you to find investors in your area and ask what they are doing right now. In my experience they will be more than happy to tell you about your local market. 

I think the choice depends on what your financial situation and goals are. Buying in a city center tends to be more expensive. The upside however is a larger pool of tenants and the potential for huge appreciation (depending on the local market). There are downsides to renting in the city but are mostly dependant on the local laws and economy. 

The suburbs can be a huge plus as well. You can purchase more properties for the same ammount of money (thus limiting your risk somewhat). This is a double edges sword as rents are generally lower so you have to manage more tenants to get the same profits. The pool of possible tenants will be smaller in the suburbs. This is another double edged sword. You can pick better neighborhoods in the burbs that will attract better tenants. You may also have longer periods of vacancy.

So really both choices are great options for investment. It mostly depends on your preferences and what you are willing to spend. I would advise you stay clear of bad neighborhoods and ghettos even if the potential returns look great. There is money to be made in those areas but it takes a seasoned and thick skinned investor to be successful in those areas. I plan someday to invest in low income areas (there are too many slum lords who mistreat people in my area) but not until I am completely ready and educated.

I understand your frustration. I was in your situation at 24. Made good money and yet couldnt get another loan. I decided to save more money and focus on learning and my career. I am not the most patient person but learning patience was a good lesson for me. I am now 27 and have a great system set up with my banks. It took time and trust. I had to find the right banks to work with (small town banks who keep loans in house). I set up accounts and got to know the employees. I looked at hundreds of properties and got to know agents and brokers. we decided to start buying we had many advantages. We had saved capital, more education, excellent credit, great contacts in the industry, and banks who were happy to have my business. I know how frustrating it is. You have all the drive and determination in the world yet the hurdles are too high. Don't give up if you cannot make it work today. Find a way to invest in yourself and in making connections. Keep your good attitude and good things will come. I know it's not the kind of solution you are looking for, but it's my two cents. I hope you keep at it and become wildly successful. 

hey Patrick. Welcome to BP. It's good to see more people from the area. I hope all goes well for you. If you ever want to get coffee send me a message. 

I was hoping i could get a reference or two from you great folks at BP. My lawyer was professional enough to tell me i would be better served by contacting an attorney that specialized in RE law.  He gave me a reference but told me he had not done any work with him and only knows him as an acquaintance. Anyways, i would love some insight!

thanks!

Don't go to the bank as if you are needing their help. Shop around and find a local bank that keeps loans in-house and treats you like a customer. Be the prize and find a bank worthy of your business. Tell the lender that you are looking for a bank to work with long term on a repeat basis. Don't settle until you find a good match. One other thing to do is have everything you need to give the lender in an organized package. Fill out your application fully and ask the banker every question you can. Know what products they have and exactly what you want. Know your credit score before hand. My banker loves when i hand her a leather document case with all tax, employment, and income information sorted and tabbed. Also included is all I can giver her about the property, loan ammount, and even my numbers. My applications are electronicly filled out and easy to read. The time I spend at the bank is usually less than 10 minutes while copies are made and I ask after my bankers family and drink coffee. I find the process enjoyable and easy now. 

I spent time finding a good paying job and then saving up enough to get my first few properties.  While I wanted to jump in early I thought it best to spend the extra few years learning my market. The more I learn the more I have seen that this is not an easy road to becoming financially independent. Lucky for me I work as a coal miner so it makes dealing with tenants not so bad. I am 27 now and so far so good. The wife and I should be able to purchase 2 rentals per year without dipping into the profits from rents. The only thing I would encourage people getting into RE to do is expect to fail. If you cannot afford to lose wait until you can. Also don't expect to come in with no money to invest and become a success. It can happen sure, but that is the exception rather than the rule.

Get some good tile down and use a higher gloss paint on your walls. Don't go cheap on paint, you will make up in cost by repainting much more often.  Sherman williams, Benjamin Moore, the higher end dutch boy paints all work well.