All Forum Posts by: David Bennett

@Christopher Winkler

@Mike Hartzog and @Dion DePaoli thank you all for your input. This has definitely provided some food for thought. I'll let you know what we end up doing. 

Thanks again,

David

@Christopher Winkler I understand how this might be perceived but the new buyer is proposing to give the old buyer the difference between the asking price and the remaining balance of the note, in which case we would either assign or re-write the terms of the note. Does that make sense? 

Naturally, I like to consider all options but asking us to carry at 4% seems a bit cheeky no matter how well capitalized the buyer might be. Additionally, I like to be able to look at a note and know that it is an attractive note to a potential buyer in both value and terms. I've had many note brokers approach me trying to buy it but I won't sell it, especially at a discount. 

Hi @Mike Hartzog I don't want to go into the particulars on the note in the BP forums. This may come off as rude but I don't want to deal with note buyers or brokers trying to buy this note. That's not my goal here. I know some of this information would be helpful but I want to be cautious about who I give this information to. 

So here's a question I should have asked from the beginning. What is the standard interest rate on a promissory note above $1M?

As promised I said I would update you on this situation. After speaking with the seller and buyer, I decided to make the following recommendations. 

1. 1. Go to a bank and try to secure a loan collateralized by the duplex. I suggested calling not one but several banks in order to make this happen. 
2. 2. If all else failed with raising the funding. I suggested that they call an escrow office and arrange, with all parties present, drawing up a promissory note secured by a deed of trust based on terms they would all mutually agree upon. Once that is accomplished then put a loan servicing company in place to service the loan on a monthly basis. 

All I could do in this scenario is to help a family out and give the best advice I knew of. If I hear any updates beyond that, I'll be happy to post it. 

David

I hold a note to a commercial property in a Southern California in a desirable area. The buyer is in a negative cash-flow situation. We have already been through foreclosure once this year and the buyer came in at the last minute and cured. The buyer now wants to sell the property and is asking an above market price for the property. He said he has a buyer who has the excess cash to spend on it and can afford to absorb the associated risks. His buyer is asking him if we would drop our interest rate in exchange for higher monthly payments.

Our desired outcomes lie somewhere between a lump sum payoff and taking the property back. Looking at what I just wrote it looks like we should just wait it out and foreclose. We are mulling this over and want to make sure we have enough information to make an informed decision going forward.

Since I'm posting on a forum that is flush full of great investors with great ideas, I would like to get some other viewpoints on this situation without having to give away too much personally.

Suggestions are appreciated. 

@Josh Prince from my understanding all parties are in agreement. I have called my attorney to confirm the deal structure is feasible and if he had any other suggestions. I want to make sure everyone is being represented equally and fairly and their goals are being accomplished. From my understanding everyone is on the same page. But that's one person's point of few. Things can get ugly if all parties have different ideas about how it should work out. 

Price, Terms and Taxes are all great points and have been considered, save for taxes. This will be conversation number one - getting everyone on the same page and moving swiftly thereafter. 

@Wayne Brooks I am a licensed agent in the State of California BRE 01902688. They need my help because the seller doesn't know how else to make this happen. I just spoke with the seller and he is breathing a sigh of relief knowing that someone is solving this problem for him.

I will let you know what happens either way. It's still in the beginning stages. 

David

Good afternoon! I have an interesting deal that was referred to me yesterday. Here's the situation. 

Subject property is a Duplex in Los Angeles, otherwise known as L.A. There are five families living in both units. Three of the parties on title want to sell their share and move on. 

My proposed solution is: Create a promissory note so the two remaining parties are making payments to the three sellers for the remaining balance of their percentage of ownership Market Value divided by 5 x 3 (Appraisal TBD). I would get paid for structuring this transaction out of the down payment. The buyers and sellers would then be using a loan servicing company to service the loan for the remaining parties. We can amortize the payments however it's decided - over 15-30 years, with an agreed on % rate and make it due in 5-10 years as an example. 

This may not be the ideal way to structure this deal so I bring here, to the BP forums for microscopic scrutiny. 

Thanks in advance for your time.

David

@Ben Bakhshi my experience with my property in Cleveland was less than stellar. I was unable to locate a trustworthy property management company or contractors. Trust was a huge element that came into play being an absentee owner in Cleveland. I eventually sold the house right before the polar vortex swooped in and stacked snow on the doorstep of every Ohio home and in retrospect I am thankful of that I divested.

So what did I learn?

1. Buy properties in states and areas that you are comfortable with. If you grew up there and know the areas and have a network of connections, invest there, even if you moved out of state. Just so long as you know the areas. If you are an out of state investor looking for a new market, go see the property personally and drive the areas in the morning and night. You need to feel comfortable where you are buying. At least I do.
2. Stick with your plan. If you are going hold your property and rent it out, make sure you see it through to the end. Meaning, after you buy a property in an area you are comfortable with, pay for your repairs get a property manger and begin renting it to see some return before you decide to sell it. See it through and get feedback on your numbers so you can determine whether being a landlord works for you.
3. Know your numbers. Because I had other deals happening concurrently, I lost sight of my numbers on this deal. In retrospect I would have put each deal in a spreadsheet so I could update the numbers and see the totals update live. If had done this, I might have stuck to my $25k asking price and waited until spring to sell or just waited until after January 1st to fix and rent it out. Instead I sold at a slight loss.
4. Hire people you can trust. If you are serious about investing then you have to look at it as though you are building a team – a team of trustworthy contractors and individuals. Make sure you have signed contracts in place with each of them so all your expectations are clear and in writing so there is never any miscommunication. Trust plays a huge factor. Frankly, I didn’t feel as though I could forge trustworthy relationships in Cleveland, which isn't to say the good folks of Cleveland aren't trustworthy. But when an out-of-towner starts buying properties because they think it's a steal, watch out.
5. When you screw up, own it and learn from it. These words are proof. I totally screwed this up and made some bad decisions but as I write this the picture is in perspective, and it was a big lesson. It could have been worse – especially if I was saddled with a vacant property and POS (point of sale) items that needed to be fixed before I could rent it – right before the polar vortex.

If I lived in Cleveland, I would probably be writing a different story. But in the end, I sure was happy when I sat in the lounge at LA Airport about to leave the country for a month and found out title wired over funds. It made for a nice Christmas.

@Yesenia C. I sure wish I had this much action on my introduction post!

I may as well throw my hat in the ring here. I bought out of state from a wholesaler because the numbers looked so good. I did a lot of research - good neighborhood, not a lot of repairs, etc. I crunched numbers. 22% cash on cash return didn't look too bad either so I bought it. The greatest disadvantage I have (this might be a personality thing), is that I can't go and meet the contractor at the house or the property management company. There is no way for me to drive by my property to see how it's being kept up or who it's being rented to. There are always conflicting stories about buying in state vs. out of state but keeping things simple also means retaining more control of your investments.

I don't know much about Grand Junction other than doing some mountain bike trips there. From what I saw when I was there, it looked pretty rural, which I like personally but it wouldn't be my first choice as a place to invest, especially if you're in LA where there is commerce and jobs. Plus, Grand Junction is a 12 hour drive! That's a long way to do a drive by.

All the best!

There is a new one that began last year – OCREIA http://www.meetup.com/Orange-County-Real-Estate-Investors-Association-OCREIA/

It's pretty good. They meet every 2nd Thursday at 6:30 at 3350 Avenue of the Arts, Costa Mesa, CA. They cover all sorts of topics not specifically multi-family.

As Tim mentioned FIBI is also popular. http://www.meetup.com/Orange-County-FIBI/

This is multi-family but in Torrance http://www.meetup.com/REAL-ESTATE-INVESTING-WORKSHOP/

I think starting a OC-Based multi-family investors Meetup is a great idea.

Thanks @Sam W.