All Forum Posts by: Chris Penny

Hi, all.  Our corporation owns a house in Los Angeles near Venice and La Cienega (adjacent to the hot Culver City area).  The house was rehabbed when we bought it and then we converted the garage to a studio.  We have both rented out.  The lot is 5880 square feet.  Zoned RD2-1.  We get decent rent for it, but bought it with hard money, which we paid off.  Now my return on my money is only around 7%, and I cannot refinance because banks don't want to finance singe family homes for corporations.

I am considering tearing down both structures and putting up apartments.  My question is...how do I estimate the cost?

Added bonus is that the next door neighbor has been thinking of doing the same thing.  We might be able to partner on a deal and build something bigger.

Finally...I am unfamiliar with what kind of return on my money I can get from a newly constructed apartment building.  I assume that, if I build it, I will get into the deal a lot cheaper than if I bought it, but not sure how to approach the question.

Thanks.

Welcome. I would be interested in your focus as well.

@Kyle R., what happens when an evicted tenant breaks the locks and moves back in?  Do you have to start the eviction process over again or can the sheriff just return and re-evict?  Or are the tenants trespassing at that point?

@Kyle Doney....what kind of returns do you get from Pine?

Cheers - Chris Penny

@Manolo D. - Thanks for that tip.  I assume then that you would approach a credit union near the property? I thought credit unions only deal with members.    

@Ryan Scott Isacksen, thanks for that tip on Western Pioneer Financial.  You are correct that I will want to find a property management company.  Any referrals would be appreciated.

That would be great, Chris. Thanks. 

Jessica, do you mean a personal guarantee?  

I must confess that part of my education has been to better understand the lending options available.  I talked to Chase because that is where we have our corporate account.  But I suspect that does not really matter. 

I appreciate that approach that Chase is taking.  They make sure the rent pays the mortgage.  That is good for me too.  My thinking is that I find properties that are in A or B neighborhoods but with up side potential.  Take 2-3 years to upgrade and raise rents.  Then I refinance and pull most of my money out so I can use it on the next deal.   The challenge for me is determining the right property and managing the upgrades wisely.  So I need to spend a lot of time exploring these markets.  I am finding the properties I like in the LA area are juuuust beyond my reach.  Fresno and Bakersfield are not next door but I can drive to them.  

Thanks, Chris.  I should say that the commercial banker I spoke with says they loan from San Diego to San Luis Obispo. I assume another officer would cover other areas.  This banker told me that they would not loan in those areas unless the investor already had investment properties there.  I assumed this was because of the potential pitfalls of those markets.  But I did not contact anyone at a Chase bank in those areas. 

I am learning as I go.  I found some properties on LoopNet in both Fresno and Bakersfield that appear to be in good neighborhoods and in good shape and within my budget.  I have not done my homework yet to know those markets better.  Wanted to inquire about the financing landscape to see if it is feasible first.

Hi, Everyone. New member here.  We have a single family home that we bought with half down and half hard money that we paid off in a couple years.  Problem is the return is not that great without leverage.  We bought it through our corporation, but found out banks don't want to loan to Corporations for single family homes. You live and you learn.  We will probably end up selling that property to get our equity out.  But it is adjacent to Culver City, a booming area. So we should hold onto it for a few more years, methinks.  Now we are looking for other properties.

Talked to my local Chase banker about commercial lending.  The good news is my personal credit rating (which is not great) does not matter.  The less than good news is that the bank will only loan me what the rents will cover after expenses, and the smallest multi-family they will loan on is 5 units.  They will loan me 65% Loan to value.  They assume 5% vacancy, $250/unit/yr for replacement reserve, property taxes, insurance, utilities, and repair & maintenance.  Take total income and subtract those expenses and it determines the size of the loan I can get on the property. 

One thing I like about this is that the bank won't let me get into a bad deal that I cannot afford.  But it is challenging to find a property that fits their needs and gets me into the deal.

I have $250K-300K to invest.  The bank's minimum loan is $500K.  Properties I can afford end up with a lower loan amount and will not qualify.  Others that qualify end up needing a bigger down payment than I have.  Chase also wants to stay away from areas where properties are cheaper (Inland Empire, Fresno, Bakersfield, etc) because there are many questionable neighborhoods.  But my instincts tells me there are sill a lot of good properties in that area.

Should I approach local banks in those areas?  Should I just wait and save more money for a down payment on a local property?  Or are there other alternatives I am not considering.  

Thanks.