All Forum Posts by: Felix Goldstein

How can you do anything without a signed contract? There is too much to agree on so need to have a contract that spells everything out. That is something a lawyer or paralegal can help you with. Not all off them know the term wholesaling. So you might need to explain in different words what you are trying to do.  It might take a few diffrent lawyers before you find one that you can work with. Doesnt seem like you want to be a wholesaler. 

In ohio the real estate dept investigators said wholesaling is illlegal and he refered me to revised code 4735. He somehow thought that is the law that says wholesaling is illegal. But that is not what it says.it says one who FOR ANOTHER and with the expectation of getting simething sells or buys real estate, etc is brokering. And therefore needs a license.  Specifically see 4735.01(A). But wholesalers do not sell real eatate for the deed holder or anyone else. If they do it right. Unfortunatly too many wholesalers still act like realtors and end up brokering without a license. I called them many many years ago now there might be different people there. Im not a lawyer. I would highly suggest asking an attorney about that. Plus i am talking ohio law you luve in another state. Every states laws are different.

@Darren Eady, I changed my profile picture.  since you feel like you are talking to a car, I figured Herbie is an appropriate picture.  To answer your question, no the red Porsche is not mine. One of my goals is to buy a Porsche.  That has been my goal since i was a teenager.  Mine would be black.  I'll change my profile picture to a black Porsche.

I like to have fun while doing business.  On a serious note, I would rather not show my face.  For several reasons.  I'm a private person.  I would rather not even have my name on here. just my company name would be good, but oh well.  Another reason is people that I'm doing business with comment on my young age.  I'm 33 but I look younger. So I don't think it would benefit me to show my face. as far as your other questions, I am about to send you a PM.  I'm a private person.

@Sandy Thomas I apologize for offending you.  I'm defiantly not here to offend people.  what got my gears grinding is @Chingju Hu saying that the agent told her the "house will go up 8000k!"  That's crazy. Now that i think about it that was silly of me.  I'm not the one that made an offer and am now looking for a way to back out.   I just looked at a property.  over the phone the seller told me the property is in good condition.  I look at it, there was missing drywall, etc, etc. far from being in good condition.  I tell sellers/their agents, i don't care how old or new the stuff is, i just look at the repairs that i would need to make to make it livable.  For the most part I think Realtors are alright.  Another example that happened a month or so ago, is the agent never relayed my offer to the seller.  no wonder she has been trying to sell the property for YEARS!.  it could be because my offer was contingent on me buying the house next door which happened to also be for sale on the mls.  A week or so after i make my offers on the land that i want to develop and the house next door, i send an email to the sellers agent for the land on the corner that i want to develop and she also happened to be my agent for the house next door. I asked her to be my agent when i called her about her land on the corner listing. She said she would forward my offers to the seller.  she never forwarded over my offer, the first time i submitted it!  That didn't bother me too much really.  I don't have time to make offers on all the properties that i want to. there are just too many of them.  That didn't make me hate ALL realtors, i just move on to the next property.  I am working with a great realtor here locally right now.  there are good ones out there. Sounds like you, Sandy, are the exception.  

Chingju, is the agent the sellers agent or your agent? if they are the sellers agent their fiduciary duty lies with the seller not you. still its unethical what the agent did. I would recommend you get an agent that represents you, and ask him or her to show you comps. I do not rely on zillow. for example, pull up the area close to east 105 and St Clair in Cleveland. the Glenville area. some of those houses zillow says are worth 80k. that is the worst part of Cleveland. if the house is in decent shape with all mechanicals there it would be worth around 10k or so maybe 20k. Although 20k would be a stretch. if its been stripped, its hard to even give it away! I ran across a two for one deal there once! :) I called on this craigslist ad a long time ago on a house in that area. the owner says "i'll tell you what i'll give you this house, if you buy my other house that i have close buy. that is the only BOGO deal i came across. The good news about that neigborhood is you can get 25%+ CAP rates. When i was sitting in my car waiting for the seller to come, I had people that were walking by stare at me because I don't fit in.@

@Dovid Staples, sounds like you are in the same boat as i was. i was like a blind mouse trying to find my way out of a maze.  also you mention that other investors are more competent that you. just because their bank account is bigger then yours, doesn't mean they are more competent.  There have been plenty of large companies that went under.  

  something else that you can offer is to manage the property. especially for the one with an out of state owner.  management has to be local.  the owner can be anywhere. 

  i would talk to a lawyer about this. I'm not an attorney but if you just "informally negotiate" you are not protected. and consult with an attorney if you even have the right to offer the property without anything in writing.  I'm assuming by "informally netotiate" you mean you have nothing with a signature. maybe an email.  from what i heard a while ago a letter of intent can be legally binding. it was a while ago. i don't remember. that is something to ask an attorney about. nothing in this post is meant to be legal advise. i'm not an attorney.  i'm just speaking from my experience.  

    I don't do letters of intents because from what i heard they are not binding. therefore, it seems like a waste of time to write one up.  I do Emails of intent. just a quick email outlining some of the important terms. if the seller agrees then i write up an actual offer.  that bring me to your concern of earnest money.  since you don't have the earnest money for a million dollar property. at least that is what is sounds like. then the only solution is to put zero earnest money down. that is what i do.  After sellers stop laughing LOL, i explain how i do things.  number one i tell them that i intend to raise 100% of the purchase price. so why would they want my earnest money. i'm looking to borrow the whole amount. i don't mind telling them that i don't have extra money to put into the deal. then i explain to them that since its practically impossible for me to find someone that will loan me 100% with me not having skin in the game, i'm planning to take on an equity partner.  i would give them the majority of the property ownership. i would be a minority owner in exchange for me finding the deal.  the other problem with earnest money that i point out, if im dealing with the seller with no brokers involved, is who will hold the earnest money? i would want it to be refundable if i don't find the money. if i give it to the seller, they can just not give it back!  anyways, this was my first plan that i came up with when i first got started. there are plenty of investors, that are open to something like that.  there is no preapproval letter for commercial properties. so sellers are fine with accepting an offer from you, with no preapproval letter, and giving you a reasonable time to find the money.

    another way is for you to start wholesaling.  

as far as deals that have happened here. take a look at 16004 Broadway ave Maple HTS Ohio 44137 Cuyahoga County. take a look at cuyahogacounty.us. that is a 10,000SF office property. rent there is $10-12/SF. its been a while since i looked at office space in that area so don't remember exactly how much rent is out there is. it was fully leased, in great condition. i walked through the property. i offered 280k for it. since i didn't have earnest money and partially because one of the sellers thought i can not have an assignment clause in my offer, they didn't sell to me. they ended up selling for 210k! Thats a GRM of less then 2. the area is alright. definitely NOT a war zone. good city to buy residential properties also. that is a very rare deal. most deals aren't THAT good but... you know.

I like retail space that is my favorite type, even though i would consider buying any commercial asset type. whats wrong with using a Gross Rent Multiplier? The AZ market must be wayyyy to hot. i would only be willing to pay a Gross Rent Multiplier of 3. Or in this case projected Rent Multiplier. and that is if the property is in a good area. if its in the war zones, i would go down to 2 maybe 1. that is the deals that I have come across here in Cleveland. GRM of 3 is if the property is in good condition. if there are repairs, i would subtract the repairs from my 16,800 price in this case.

so according to my method i would pay 16,800 ($14/SF X 1,200SF). since its vacant maybe go down to 2.75 GRM. something must be wrong somewhere here since my price and @Dovid Staples, LOI are not in the same universe.

My guess is the AZ market is just very very hot.  I called this broker that was selling retail space in Los Angeles, when i told her over the phone what my price would be she said "stop playing". ugh, I wasn't playing.

That brings me to my next question. corporate backed NNN type retail properties. sell for a cap rate of around 4 in CA. i'm assuming its not a new lease. say there are 10-15 years left. that same 20,000SF box on an acre or two of land would sell for a cap rate of 8 maybe 9 here in cleveland. a brand new NNN Mcdonalds lease sold for i believe a cap of 4 here recently. so my question is why would someone pay two times more for the same 20,000SF box on an acre of land in CA when they can buy the same thing basicaly here for two times less.

@Jeff Greenberg @Oscar Pinto

@Joel Owens

this is a great post.

@Tom Anderson I would ask the seller to finance the whole thing for a few years until you build up your equity/down payment.  anther option is to not go to banks. they are the cheapest place to borrow from but they want to know everything about you, they are conservative (ie: want 20% or so down payment), who knows in the big pile of paperwork it probably says you are signing your first born away.

i would need to know more about the property and about you before i can recommend a lender.  intentioncapital.com is a good mortgage broker. Jeff is the person over there that you would want to talk to.  His minimum is 1 million.  He told me a long time ago that it takes the same amount of effort to raise a million as it does to raise 40k.

@Marc Maser, i'm not exactly sure what do you mean by the seller does not want to hold a portion of the loan that they currently have out.  as far as you not having the down payment, do a rent to own or a land contract until you build up the 130k down payment. you have 9k/month coming in so using rough numbers say you are paying 3k/month lease payment with option to buy to seller.  you take over all maintenance, and utilities, everything really except for taxes and insurance.  so in one year you have equity of 36k. so in roughly 3.5 years you have the 130k in equity/down payment built up. then you can go to the lender adn say look the price of the property is 650k. i'm asking for a loan of 520k.  at that point you would owe only 520k to the seller since you have been making payments and building up your equity.

@Greg W.I would install another water meter and run the commercial unit(s) on separate meters and have the commercial tenants pay for the water.  in the residential units(sounds like this is a mixed use property) i would put one meter for all of them and i would pay for the water for the apts.

as far as your mistake. i would reimburse the tenant for some of the water. since they paid for the residential units water.

great advise from everyone here.  there is no pos inspection on an apt prop in lakewood. rare to find a point of sale for commercial properties.  I believe that is what you meant by your third point "city violation".  

7% cap rate is wayy to low for lakewood. this market is different here then in CA. for a 7% cap why not buy a national company corporate backed NNN lease with 10-15 years remaining. your expenses would be zero. and your check is genearted by a computer and shows up in your mailbox or in your account.

yes that is fair. 4% seems low for a management fee. perhaps its the market your in.