All Forum Posts by: Dustin Beam

In case it's not painfully obvious, I'm new to this. In light of that, balloon payments are when you owe the full amount after X amount of years, right? So in @Al Wilson's example, I'd pay a mortgage for 5 years and then owe the balance at that point?

@Wayne Brooks, so would the loan structure I described be what I can expect from any bank? I hate the idea of my interest rates changing every 5 years, as I won't know what to expect from my profit margins. Seems scary to me. Not to mention that I could only assume that I would have refinancing costs every 5 years.

So I discussed getting a loan on a commercial property (8 units) and he gave me a "soft" approval with values as 30yr fixed and around 4% interest. I spoke w/ him again today and he said it would not be that. I guess there was a disconnect on the type of property. Either way, I don't believe he intentionally made a mistake or anything.

He said I now would most likely have to get a loan w/ a higher interest rate and 5 year ARM. I'm not real familiar w/ that but he told me I would have to refinance every five years. Hmmm, definitely not liking the idea of that.

So, I'm here because I want to know is it realistic to get a traditional loan on commercial property? I was planning on a basic 30 year w/ 25% down. If so, please let me know of any banks that do this. I'm in the negotiating phase right now, so I hate having this wrench thrown in the spokes so to speak.

I love those old KC homes. You really have to be careful about the neighborhoods though. They can change quickly in the city. I was actually thinking about moving down there...and my general rule of thumb was to stay west of Troost. Harrison is, but is close. Some areas seem to be gentrifying. 

I can't really help you with your sale, but just some friendly advice to keep in mind if you do this again in the area.

Please keep in mind I'm a noob and do not own property outside of my own home. 

Now that the disclaimer is out of the way, I do live in KC and can give general info about the area if you have more specific questions.

@Thomas S.

This property does have many other similar units next to it. That is generally considered a negative. The good news is that they are better maintained than the building I'm looking at and rent for $550/mo. There really isn't any reason I couldn't fetch similar numbers, or possibly slightly lower, by cleaning it up. That would boost my total rent to 4200-4400.

Water and trash could be billed to tenants, but then my rent would probably need lowered or it wouldn't be competitive pricing overall.

As far as poor management, I just don't the place is maintained to the level I would personally have it. Simple things that I saw. The property backs up to an actual rear lawn with trees. A nice place for kids to play or to barbecue or whatever. But there was trash in the bushes from being blown around. There was a small hole in the foyer wall of the 1/2 I went into. The mailbox was original and terrible looking. It had wood paneling on the bottom 1/3 of the foyer wall that was beat up, dark brown paint should make that look WAY better. The two main entry doors need painted or replaced. Things like that add up in cost, but also go a long way to improve the aesthetics.

@Larry Turowski 

You're right that maybe it's more "common". But in my area, I rarely see a 4plex around $143k...so double that for an 8-plex and it does seem reasonable depending on the price per unit.  I expect at least two need work as the seller basically said so. I haven't personally come across too many 8-plexes to compare apples to apples.

I think the part that I like most beside proximity, are the areas surrounding it. Most places I see similarly priced might be next to shadier areas...and for me I always worry that it will creep towards potential properties I'm looking at and lower the rents. That's not a worry here.

Thanks for the reply @JD Martin.

I forgot to mention that this is an 8 unit building. They currently rent 495/month to 550/month. So the profit per door, if my calcs are accurate, are closer to 110/month. However, one thing to consider is that I will be the manager for the foreseeable future, so my cashflow should around 1200/month or $150/door.

My break even should be something like 75% occupancy...again, if my calcs are reasonable.

So I previously started a thread about a property I was looking at and I put an offer in, admittedly it was a low ball offer. The Seller didn't budge much, went from $300k to $290k and now to $285 plus closing costs. I ran more numbers....being my first property I really want as much conservatism in my analysis as possible to make up for any noobie calculation mistakes. I have a pic of my analysis below. 

I'm assuming an additional $20k in it for fixing up the place. That is a super rough estimate as I've only been inside one unit. My offer is obviously contingent on seeing the entire building, thorough inspection, etc.

Anyway, I'm tempted to walk away, but yet the numbers aren't bad. The building isn't a "steal" either IMO. I should mention that the building will be very close to where I live (a nice bonus), is in a lower income (mid $30k per household) area. HOWEVER, it's very low crime (1 block from police station) and is surrounded by middle and upper middle class areas with very low crime. It's simply an area where people don't make a lot of money, but everything else is good. I'd have no problem with my girlfriend going there at night.

So take it or walk?

Well, I let my agent  know to put in an offer. *fingers crossed* 

Still willing to take any advice being offered. I added in a few more figures like water and trash. I dunno why, but I thought it was 2 x 4plexes but it was an 8 plex. I just glanced at the outside pic and paid attention to the interior. I know that changes financing a little, but the banker said it's still all ok.