All Forum Posts by: Daniel Holbrook

I am looking to buy a property ASAP with an assumable mortgage (usually VA or FHA). Send me what you have or can find!
Can be single-family or 2-4 unit property in Salt Lake County! Wholesale, sub-to, or wraparound situations could work too.
Criteria:

• Salt Lake County
• Gap between loan balance and asking price under $200,000
• Interest rate below 5%
• At least 3 bedrooms and 2 bathrooms
• Especially focused on properties that work as investments (ADU, multi-unit, excess land, etc.)
• PITI below about $5,000.

Looking for a relatively good value and the potential to use as an investment during and after the time I live there.
I am not VA, but non-veterans can usually assume VA loans. I am prequalified and have the down payment ready to go!

Thanks in advance!

Hey, after inspecting the buildings there was too much deferred maintenance and it was not clear the tenant would want to stay badly enough to fix it. The tenant may have renewed or extended now. Found some other good commercial deals since then.

Hi Sarah.  I use Crown for a fourplex.  They are okay.  I would also check out Preferred Management.  I haven't had experience with some of the smaller companies, but there may be a good manager among the many not as responsive managers.

Hi David. Rents have steadily increased in recent years. There is a strong new-construction pipeline, but rent demand is keeping up or even outpacing supply. I haven't seen anything close to the 1% rule in MLS, but people are finding a few good deals. I have a couple properties that are moderate for cash-flow, but good for appreciation. Appreciation in Cheyenne is over 5% per year by most metrics.

Hi Chad,

Wanted to offer a couple thoughts.  Many appraisers take 5%, or whatever "general" vacancy rate they feel comfortable with in the market.  

However, if a property has a multi-year history, with no projected change, I would rely on actual vacancy instead of some "general" number.  For example, if a property has annual PGI of $100,000, and two or more years of EGI averaging $98,000, then I would use a 2% overall vacancy rate (physical vacancy and collection loss).  As long as nothing is changing at the property or the market, this should be a better reflection of market value, because it is how most buyers would value it.

Raising rents is another question.  If they are clearly below market, then the appraiser could do a a fee-simple value (all rents at market rate) and a leased-fee value (using actual rents).  An approach I often use is to value fee simple first, and then take a deduction for the time and hassle of raising rents, yielding the leased-fee value. 

If you are up to it, I would raise rents before selling, deal with the potential increase in vacancy, then start to market it when it fills up again.  The more months at the new, higher EGI the better.

Let me know if you have any other questions!

Dan

The Deal

I have a verbal contract for two industrial buildings in Wyoming (Cheyenne and Casper, the two largest cities).

I am very motivated to move forward on this deal, but do not have the full 25% down payment. I am looking for an equity partner who will co-invest and co-own, for a pro-rata return.

Property Details

The buildings are each about 3,500 sf. They are leased to an international tenant, who has occupied the buildings for over 10 years. The tenant maintains the interior and has spent significant amounts on upgrading the buildings, so they are very motivated to stay. The lease expires in one year, but I think the renewal probability is over 95%--otherwise I would not be near this deal. We should be able to bump the rent slightly at renewal.

As a NNN lease, tenant reimburses taxes and insurance, and pays all other expenses including repairs. Even if taxes or insurance move significantly, the NOI is not diminished.

I pro-forma about 9% cap rate.  Targeting about 10% cash on cash return.  Your dollars per hour are far above what you normally see in the residential world because the tenant takes care of everything.

Please message me for more specifics about the pro-forma and other questions you have.

Thank you.

Hi,

The Deal

I have a verbal contract for two industrial buildings in Wyoming (Cheyenne and Casper, the two largest cities).  

I am very motivated to move forward on this deal, but do not have the full 25% down payment.  I am looking for either of two partners

1) equity partner who will co-invest and co-own, for a pro-rata return.

2) private lender for most of the down payment.  I would be willing to consider short-term financing of one or two years so the lender is not strung out for too long.

Property Details

The buildings are each about 3,500 sf.  They are leased to an international tenant, who has occupied the buildings for over 10 years.  The tenant maintains the interior and has spent significant amounts on upgrading the buildings, so they are very motivated to stay.  The lease expires in one year, but I think the renewal probability is over 95%--otherwise I would not be near this deal.  We should be able to bump the rent slightly at renewal.

As a NNN lease, tenant reimburses taxes and insurance, and pays all other expenses including repairs. Even if taxes or insurance move significantly, the NOI is not diminished.

I pro-forma over 8.5% cap rate.   

Please message me for more specifics about the pro-forma and other questions you have.

Thank you.

I am also looking for a HELOC for a rental townhome in Lehi, Utah.

Called MACU, but they said they only do home-equity loans for primary residences.

@Cody Thompson it sounds like you got a HELOC for a rental property?

Anyone else with experience getting LOC or 2nd loan for a rental property? I'd like to go 80% or 90% LTV if possible. I only need the money for a year or two, so the amortization and fixed-term are not that important.

Thank you!

Okay, thanks Karen. 

I will add that these are small industrial buildings (3,500 sf that I unofficially value at about $350,000 each). I'll look more into partner or syndication options too.

Hi All,

I had questions about what is realistic for private, secondary financing for commercial real estate.  Thank you in advance for any wisdom you can share!

Situation: I have a verbal contract for two NNN-leased industrial buildings. I do not have 25% down, and the seller is not interested in carrying any. I originally planned on an acquaintance lending most of the down payment, but he recently decided to stop making personal loans.

Questions:  What ideas and options do people have for secondary financing in the commercial world?  Should I keep talking to friends and family?  Are there business loans that can be applied to real estate?  Private RE lenders?

The deal does not really make sense if I have to pay 10% or more for the secondary loan.  Is it realistic to hope for a $50,000 to $100,000 loan at 6% or 8% (20-year am, 2-year term)?  I feel like a lower rate is justified for this deal for some of the following reasons:

- international tenant who has occupied both properties for over 10 years (and NOT energy related)

- NNN terms where they maintain everything except the structure

- Purchased below appraised value

- 800 credit score of borrower 

- short term loan.  I intend to pay it off in 1 or 2 years.

Let me know what you think and your experience. 

Thanks!