All Forum Posts by: George Voutsinos

Keep searching for lenders because you're speaking to the wrong ones.  They one, aren't familiar with completing 203k loans or two..simply don't want to be bothered with them because they are more paperwork.  

Now that I'm thinking about it more, insurance would be higher.

Bump

I'm underwriting a building now that's in a salt air city, a block from the beach.  Salt air corrosion is real.  Studies show salt air affects buildings up to 50 miles inland.   Curious how others handle underwriting?  Just do normal underwriting and beef up the inspections during due diligence?

Thanks for your time!

Research SBA loans.

After it's stabilized looking like $28-30K annual cash flow, probably $72 per unit with a 4.3% cash on cash return.....assumptions using market standard opex since you didn't provide that but did you underwrite this one?  Great thing about commercial is the forced appreciation.

@Stuart Udis no worries but you're assuming too much information I didn't make available.  

1. Cash flow doesn't leave with a tenant. You're making it sound like it packs its bags and never comes back. Vacancy should be calculated into your underwriting.  And units should STILL cash flow with the vacancy factored in. Any class property will have vacancy.

2. You're assuming I'm buying C or D class that may require loads of CAPEX. I focus on B class areas.

3. I don't buy properties off the MLS. No listings cash flow unless you're buying in C & D class areas where you're more susceptible to problems & evictions. I avoid warzones, definitely no D areas for me. I market direct to owners.

4. I don't trust proformas.  They're created by the brokers that are trying to sell the property.  I'm sure you know this, many times things are left out intentionally or unintentionally.  Really need the actuals and put the numbers through stress tests.  Have you ever seen a proforma painted in a negative light?

5. I agree with your last sentence, I'm in it for the long haul where the appreciation will eventually come.  Equity fluctuates with the market, it goes up & down.  

One important thing to mention with the 203k loan is that they require you to live in the property for 1-year.

I'm a buy & hold investor and I underwrite for cash flow only.  If the deal doesn't cash flow I don't want any parts of it.  Appreciation is great, but I'm not going to buy something and be out of pocket for years & years.  Equity comes & goes, cash always flows.

Also don't forget, as the seller...if you seller finance your house you'd be deferring the capital gains tax so you're not getting hit with that big lump sum if you sold it conventionally.  You'll also save on real estate agent commissions.  Just food for thought.