All Forum Posts by: Mark A.

Hi Matt. I'm in Madison. I'm not a builder or realtor but would be happy to help answer any questions about the area. I know the reputation of many of the builders. Also as an FYI, my wife is an interior designer and does primarily ground-up new construction or major renovations in Wisconsin. 

-Mark

Hi Cliff. I live in Fitchburg WI. I'm biased, but I love the area. Fitchburg has some great areas and some "less great" areas. I wouldn't say that Fitchburg is more or less desirable than downtown Madison - Downtown is great if you want to be more urban but if you move to the suburbs (Fitchburg, Middleton, etc) you'll get more square footage, garages, yards, bike trails, etc. I prefer Fitchburg. I don't invest in multifamily right now due to low cap rates but I would definitely do it in the area for the right property. Feel free to let me know if you have specific questions or specific locations. PM is fine :) 

My business partner and I own several buildings / businesses in the Madison WI area. We have 2 purchases for business + associated real estate under contract totaling $11M purchase price and we can bring 10-20% equity. These businesses are doing better than break-even on day 1, are less than a 1.2 DSCR as-is, but have significant upside with proper management. Most existing staffing will remain in place but we will be replacing / assisting some of the management. We've been working with local banks for past purchases but they said that they are unable to loan on hairy deals right now and/or do not loan in the geographical region. We are looking for a new commercial lender who'd be willing to make our loans at 80-85% bank financing. Ideally this loan would be Interest Only for 12-24 months and then we could refinance / balloon. We'd be happy to discuss terms to make the lender comfortable. Does anyone know of any banks lending to experienced investors in Wisconsin for deals with some complexity / challenges?

If I understand your question correctly, you are asking if you can get a mortgage AFTER you complete the $20k rehab? If that is your question then the answer should be yes. You wouldn’t currently have bank financing on the property so there’s no seasoning period. You could get a new mortgage (for 70-80% LTV after anew appraisal)and hopefully pull out $80k to pay your seller + most / all of the $20k you spent on repairs. If you bought really well and it appraised very well, you might even pull out some cash above and beyond what you spent. This is one version of the BRRR strategy

There was just a very good podcast about this topic. Check out episode 111 of The Old Capital podcast. It was with Craig Brown and talked about many ins and outs of 1031 options. Well worth your time to listen to it.

Shop around. Check your local banks - you need to find one that is investor friendly and wants to increase their real estate mortgage holdings. You should be able to find 20-25yr amortization, 4.5-5.5% 5-year fixed rates, 5 year balloon if you come in with ~20% downpayment. 

Consider having the seller quit-claim the property into a new LLC and then you purchase the new LLC. This has a benefit in that there is no record of sale to the city / county so no change in taxes based on the sale. It also means you purchase a "clean" LLC so there are no old lawsuits / liabilities that you are also inheriting.

You can always ask for them to replace it. They can say no. They won't replace it if you don't ask. 

I was born and raised in Madison WI. After leaving for college I came back to Madison to raise my own family. Madison's real estate market is strong and I don't expect to see it decrease in a downturn as hard as some other cities (because of the strong job market, the university, and it being a more stable Midwest town).

Unless he plans to sell and 1031 into a different / larger property, selling (to you, hopefully!) via Seller Financing would potentially earn him more overall (because of the selling price + interest) and also provide tax advantages (limiting his income in the first year / year of sale and stretching it for several years). Suggest you try for seller financing at $xx down (I try for the lowest down to conserve my money), yy% interest rate (don't lowball the interest rate, look for a win-win number lower than hard money but higher than you'd get from the bank), at a ~25 year amortization and balloon payment in ~5(?) years. He may not want to hold your note for 25 or 30 years but after 3-5 years the loan paydown +/- appreciation will hopefully get you enough to refinance into a conventional loan.