All Forum Posts by: David Gore

My grandfather passed away two years ago. My mother inherited the home, but wants me to have the proceeds from the sale of the home.

I have a potential buyer interested in a land contract.

I need to determine the best way to handle this deal to simplify the process and minimize taxes.

My mother would prefer not to be part of the land contract. She doesn’t want to complicate her simple taxes, and she doesn’t want the burden of collecting payments, etc.

The home belonged to my grandparents for most of their lives. The value we estimated in the probate paperwork was $35k.

The buyer is willing to pay $45k plus interest in installments over 15 years.

Questions:

1.) If my mother gifts me the house, will she have to pay any taxes? If she records the gift amount as $45k, and we estimated $35k on the probate paperwork, does that mean she will need to pay taxes on a $10k gain? If so, it seems wrong as we had no idea what the home would sell for at the time of his death. No appraisal was performed or ever performed on the home.

2.) What tax obligations will I incur by receiving the gifted property and immediately selling it via land contract? Will I be subject to short term capital gains taxes? If so, would it be on the full amount, or just the interest received over the $45k gift basis amount?

Any advice or recommendations would be greatly appreciated.

This is in West Virginia.

Thanks,

David

I was not able to find a lender willing to work with me on the deal. However, I was able to purchase the property with only 10% down by convincing the seller to do owner financing for a short term. Never give up on a good deal. There’s always a way!

I’ve renovated the property, have it fully leased out, and it is cash flowing extremely well. I’m already under contract now on a second commercial property.

Best of luck!

David

Hello,
I just successfully purchased a 13,000sf office building in October of 2018 using owner financing with only 10% down. The property was positive cash flowing since the day I bought it. I've made some renovations and have the property fully leased out for the next 3 years.

Now, I have my eyes on another nearby property. It is also a commercial property, but this one has been vacant for at least a year and has been partially damaged by fire. The property is not listed for sale and is not in foreclosure, but I contacted the out-of-state owners, and they are motivated to sell. However, they owe the bank approximately 4 or 5 times what the property is currently worth. Also, from a public records search, I can see that the bank has filed a law suit against the owners for nonpayment of their debt.

My questions are:

1. What is the best way to approach this deal? Should I submit a purchase agreement to the owners for what I feel is a fair price, even if it is much lower than what they owe the bank?
2. How likely is the bank to agree to the deal?
3. How concerned should I be about the pending law suit?
4. I don't have enough cash to buy this property outright, and the distressed state of the property rules out conventional financing. I'm hoping I can refinance the office building that I just purchased through a conventional lender and cash out enough to purchase this other property. However, I've only had the property for a couple months, so there isn't a long financial track record. How likely am I to get a refi on this property? I purchased it for $450k with $45k down. I currently owe $395k and would need to refinance approximately $500k. The estimated NOI and cap rate value the property at around $750k.
5. Are there any other creative financing strategies that I could employ to acquire this property? 

Thank you for your advice!
-David

After a roller-coaster ride for the past 2 months, it appears that I'll finally be closing on my first commercial property on October 1st.

Two of the three retail/office tenants in the building have leases expiring on October 31st. Tenant A is saying they are leaving, but they need an additional month to clear out. Tenant B is needing more space and renovations or they intend to leave as well.

Tenant A hanging around is going to make it difficult for me to plan and perform expansions and improvements for Tenant B. I don't want to risk losing both tenants, as it'll leave my new property 2/3 vacant.

Ideas I have in my head are:

1. Force Tenant A into a new lease for 3 months, and give concessions to Tenant B to wait 3 months for their expansion. This would keep the property fully occupied for the next 3 months, which would help give us more time to find a replacement for Tenant A. However, Tenant A is most likely not going to want to renew for 3 months. They just want 1 month. So how tough should I be? (They haven't had a rent increase in 9 years. They've been extending for 1-year periods for the past couple years supposedly claiming the same thing about moving.)

2. Force Tenant A to vacate completely on October 31st and start tenant improvements immediately for Tenant B, with less concessions given to Tenant B.

I'm new to all of this, so I'd really appreciate any advice from more seasoned professionals.

Specific questions I have:

1. How much of an increase should be charged to Tenant A for a 3-month extension, that inconveniences us and Tenant B?
2. What if Tenant A refuses to sign a 3-month extension and intends to stay, paying monthly? If I give them 30-days notice that this will not be allowed, will I have the right to force them out when their lease expires on October 31st? I kind of feel like they're trying to force this into a month-to-month situation.

Thanks!
David

I’ve been working a deal to acquire an office building with 3 tenants for the past month. I signed a purchase agreement today. I drove by the property tonight and noticed a brand new vending machine installed on the sidewalk by the front door of one of the tenants.

I know the property owner/manager didn’t approve of it, so it must be someone that works for the tenant that had it installed.

The office building is a 225 foot long single story building with 3 tenants. The vending machine blocks the entire sidewalk. No way a wheelchair could get by.

The use of the outside sidewalk is not mentioned in the tenant’s lease.

I don’t want the machine there. My goal is to clean up the property and make it nicer. And if anyone deserves to make money from a vending machine located outside the premises, I feel it should be me. Their lease is only for the square footage inside the walls, correct? 

They are also a retail store (the only retail in the building) and they have been putting goods for sale out on the sidewalk during the day.

I don’t like it, but they are a long term tenant and I don’t want their first impression of me to be a jerk trying to throw my weight around...

How should I approach this issue? What rights do I have? Any advice from those more experienced?

Thanks!

David

Great advice, Joel!

Thanks everyone!

Hello,

I'm planning to go under contract on my first commercial deal to purchase an office building with 3 tenants. However, the leases for 2 of the tenants will be expiring less than a month after closing. One of the tenants will most likely be vacating, but the other tenant has expressed interest in expanding into the vacated space. The tenant wishing to expand was recently acquired by a very large nationwide medical corporation.

How do you work out new leases with existing tenants, when you're not yet the property owner?

Also, I'm sure the bank is going to be concerned with the leases expiring immediately after closing.

So, what is the preferred way to get new leases according to my terms prior to closing, and keep the bank happy?

Thanks,
David

Got ahold of the lender moments ago. He said the guy working the spread was out of the office yesterday and today. He said he would know a definite on Monday or Tuesday at the latest.

I asked him if it would help increase the priority if I were to go ahead and sign the purchase agreement. He told me it wouldn't change anything on his end.

So, I'll give him till Tuesday and see what happens.

- David

Thanks Chris!

I was just trying to be courteous to the seller by not going under contract unless I knew for certain the financing would come through with 10% down. It seems from reading on here that most lenders want at least 20% down, thus my concern.

I'll go forward with signing the contract, contingent on financing at 10% down. If anyone else has further advice or recommendations, I'm all ears.

Thanks again,
David

Hello everyone! This is my first post.

I've flipped a couple SFHs over the past couple years, and right now I'm trying to purchase my first commercial property. I've done my homework on the property and know it's a good investment. However, I only have enough cash for 10% down. The listing agent said that financing shouldn't be a problem, and she gave me the number to a local commercial lender that she said had done numerous loans at 10% down.

I called the lender early last week and gave him the basic information and he said it shouldn't be a problem, but that he'd have to get preliminary approval first. At the end of last week, I contacted him again and he said to be patient and that he'd let me know next week. I contacted him yesterday morning and still haven't heard back. So I've spent two weeks and still know nothing.

I have not signed a purchase agreement yet, because I wanted to make sure that I could get a loan with 10% down. However, I've also spent several hundred dollars on inspections and a flood survey. So I want to lock down this deal ASAP.

So, my questions:

1.) Is it normal for a commercial lender to need over 2 weeks to get preliminary approval to do 10% down?
2.) The seller may be willing to seller-finance some of the down payment. However, the lender I've been dealing with said his bank would not allow such an arrangement. I've read about this strategy in numerous books, including Brandon's, so where do I find a lender willing to structure the loan this way?
3.) Even though I don't have preliminary approval for being able to finance at 10%, should I still sign a purchase agreement? Any recommendations on the contingencies?

Thank you!
David