All Forum Posts by: John Bowen

This management company for the seller is driving us insane. The day before closing the revenue abstract shows the prorated rent for the reminder of the month being consumed by back rent owed by one tenant. This is after we finally recieved estoppels that showed both leases in good standing a week ago!!!
This is not the first time the their numbers have not made any sense.
Sent a few blistering emails late in the day and plan a few more in the morning. Hate to blow up the deal over $2K, just feel like getting screwed around with.

Just how importany are the estoppel certificates?
Evidently the property managment company is having a great deal of trouble getting one of the tenants to sign. There are 2 tenants. Both with completly different leases. One a standard lease and the other drawn up by an attorney. 1 is paying CAM plus T&I. The other just base rent. Base rent is the same for both. Both have a clause about signing estoppels which is well past due.
That and the 2 tenants seem to have some kind of ongoing issue with each other. Once we have it the project will become 76% occupied.
(Each tenant has 12% of the project. Our business will be in 52%)
I can see why the bank wants this property off the books. The management company has the leases all screwed up, has been billing them pretty hard, and it's been 76% vacant for quite some time.

Buying an industrial complex. Building A 13,500 sq ft. Building B 12,000 sq ft.
The primary cash flow business we own will occupy the larger building. The smaller is broken into 3 spaces, a 6,000 and two 3,000 with both smaller units being leased.
Trying to determine type and term of triple net lease from one LLC to another when we own both. I have to provide this to the lender. I guess being the managing member for both we could amend it at any time.
Ideas?

Moving along well. The place appraised for 30% more than the agreed price. I had an extra $50K built in to the SBA loan for improvements.
The bank is now telling me I can use any expense during this as part of my equity injection? Legal fees, SBA loan fees, surveys, inspections and such. Anybody heard of that?
The deal is $850K, the loan is $900K with 10% down for equity injection. Already ponied up $63,750 in earnest money. The complex appraised at $1.15M. I have not figured out if using the $15K in expenses as part of the equity injection is a plus or not.

A couple of the projects we have done required major permitted rehabs or remodel. We found that getting the inspector there before we even started and explaining our situation that they frequently were very helpfull in explaining exactly what was needed and what could be grandfathered. They seemed a bit understanding that you bought this dream and something was done wrong before hand that you are now stuck with.

Our companies are all set up as LLC's and taxed as an S corp or a disregarded entity. We draw a "reasonable" salary from the one that generates the majority of the income and the rest in draws. We do have to pay in quartely as well as payroll deductions.

Two things I have learned here today is that Quickbooks is my friend and I am glad I have a good CPA I pay to do this for me.

My CPA has pounded this into my head as our business that provides the capital for our real estate adventures carries $300K of parts inventory.
The IRS considers inventory to be the same as stacks of hundred dollar bills on the shelf. It can be in the bank or on the shelf. You can not expense inventory until you sell it as cost of goods sold. (aquisition cost.) As far as they are concerned you can put your profit in cash or inventory, either way they want a cut. Inventory can gain or loose value at times. That mostly matters for property tax reasons.

What I love about real estate investing is when markets do something strange you can still drive over there and jump up and down on it. It's there, it's real, the numbers on the screen can crash and it's still there. I understand it, I love getting the deal done and seeing the finished product.

We like to buy in January and have ready for rent in May. Normally rehabs. When school lets out people start looking at moving. Have signed before in June for August with a super solid tenant on a 2 year lease. Better to loose a month for a really good tenant. They have been great and on their 3rd year now. January to April is the slow time for my regular business so it lets me focus on houses.

We did one last year. Bought a severely damaged house. Paid cash for it and the rehab. Got it leased and refinanced for 80% new appraised value with a local bank. Ended up with $10K actual cash and $35K equity in a $125K house. 5 months from first closing to refi.
Still married too :) It was not an easy one. $37K purchase, $60K rehab, $90K loan.