All Forum Posts by: Heath Jones

@C-Dell J. There is a slight problem with finding reliable GCs. Depending on the type of work you need done, it can be a challenge. If you are looking to buy, reno and then rent, it's a bit easier to find someone to do all the work you need than if you just need a small one off-job.  Let me know if this helps or if you need some recommendations. My advice would be to go for it though!

@Laura Williams Daaaanng!! That is messed up. Sorry to hear about this.

Thank you all for the feedback!! I thought I'd get a little bit more specific. For this particular deal, it has sat listed for sale for a long, long time now. It is a 36 unit storage locker building coupled with larger building currently rented out to a gym. The storage lockers are not actively rented and the gym is only paying $700 in rent. The owner is older and wants 200k. Herein lies the problem (I probably should have been more specific from the get-go), even if you were to be overly optimistic and base the evaluation on GROSS, and not NOI, at an 8 CAP you would get an overly generous value of 105k (=8400/0.08).

@Michael Wagner You're right that owners don't need to know what a CAP rate is, but they will need to know why the bank won't give a 150k loan (75% LTV on 200k price) on a commercial real estate deal only valued at most 105k. This is why I was asking how lenders (I should have said appraisers) value these properties if they aren't performing. It is on me to educate the owner on why his property is not worth 200k and then come back with a fair offer. However, it is going to be difficult to convince them that their property is more than likely worth 100k less than they think it is.

How would this property be valued if the gym was not renting the building and there was $0 income? At some point, it can't just be based on the income, otherwise, a property with an NOI of $0 would be worth $0. If that was the case, how the appraiser evaluate CRE such as this?

@Brian Burke Looking to seize any and all opportunities that may present themselves. Not concerned or afraid, just moving forward with caution and proper diligence.

Thank you so much! That information is most helpful!!!

How do small town banks appraise storage facilities? I've found that most "mom and pop" owners have no idea what a CAP rate is and just know what they paid for a place and what they think it's worth.

There is no concept that the value is based on the NOI. Also, there are no commercial appraisers anywhere close to this property, so how would a bank appraise it to know how much they would lend on the loan?

@Ashley Petersen Don’t listen to the haters. This is a steep ask, but why not work toward bigger goals? My wife and I had 33k and within 3 months increased our monthly cashflow by 2k. Granted we bought a 4 unit with the 33k and a 16 unit using personal loans from other people, but those personal loans will be paid off from the income of the 16 unit in less than 5 years (and then we only owe the mortgage) and we are still getting $100 per door for ourselves each month. Finding, creating and closing another deal of 30+ units to cashflow $100/door and we would hit that 5k a month in under 2 years. IT IS POSSIBLE!!!

Basically, you will need to leverage other people’s money creatively with your 60k to make it happen though. Also, multifamily is the way to go. You’ll have to start looking for multi unit deals 12-40 units. Close one deal a year over two years, and your there. Don’t have a limited belief mindset like many of these other posters and Good luck!!!

@Darius White You could start with multifamily. My wife and I’s first property was a 4 unit and our second was a 16 unit. While we had enough to buy the fourplex, we bought the 16 unit using other people’s money and within 5 years (or less!), the income from the property will pay back everyone who loaned us money.

I think multifamily is the way to go, check out “The Multifamily Real Estate Experiment Podcast” (on iTunes and Spotify) and learn more about how it is not as challenging to buy bigger properties as people think it is. There is absolutely no reason not to go bigger as soon as possible!

@Darius White Are you trying to buy a property outright in 6 years saving 2k/month? That is waiting a long time to start REI. That's 6 years that your money isn't doing anything but gathering dust and loosing value.

If you are saving 24k per year, you could potentially buy one property a year for 6 years using the saved money as a down payment for each one. What is your goal and reverse-engineer what it will take to get there.

@Adiel Gorel I thought it already had...