All Forum Posts by: Jimmy H.

Have read a little bit about this in other threads. I know (from being in banking) that the FDIC and other egulatory entities are making it quite hard on the banks. IMO the government caused many of our problems and is using the bank's as scapegoats to shield the blame. They are putting regulatory procedures on banks, not policies anymore, they want to control every minute detail of bank operations - and IMO want to control the banking system as a quasi gov't agency itself (as if it isn't already).

I have heard from many that the FDIC and other regulators have the intentions of shrinking the total number of banks nearly in half. I Think we have somehwere around 11,000 or 12,000 such institutions and they would like that number to be closer to the 7,000 range.

Even if this is not true, it is a fact that banks are closing left and right, almost daily.

I am interested in a bank property in my area that is on a fresh 10 year lease to Integra bank. I'm not familiar with this bank, they are regional bank with 75 locations throughout IN and KY (maybe OH). I want to know how to do my research and due diligence on this firm. The FDIC will let you know on their website they day after they closed a bank down, but I want to know how this bank is fairing before that happens. How do you do appropriate due diligence on banks? If Integra did go under, once the FDIC forces an acquisition of Integra by another bank, do they have to honor my lease?

This particular branch is in a growing peripheral town about 30 minutes outsid emy hometown. It is on a growing side of town and is relatively new construction. It is a fresh 10 year lease, listing price of about $1.9 mill and a CAP of about 11%. After 5 years the CAP will increase to 13.2%. the bank is newer contruction, not an old dinky building, 3 drive-thru lanes and a nice lobby.

If the bank stays afloat it seems like a pretty good deal.

I am curious if anyone has experiences with a recommendations about such an investment.

I was not aware of this property until recently and cannot confidently adress exactly why the original owner went under. It has been under bank ownership and run by the bank since January now and I know that they ar enot doing the most efficient job, I cna only assume it was the same for the previous owner. the property was purchased by the previous owner in '04 for 1,660,000 so I cna only assume he had too much debt and was not operating efficiently.

rents are:
48 1BD/1ba units @ $375
20 2Bd/1Ba units @ $475
4 3BD/1BA units @ $575
currently 77% occupied.

I have yet to tie up the property for further due diligence, but from what I have noticed thus far the roof and windows are quite old. No active leaks noted yet but they may be a concern. there is an old inground pool that is a liablity but I would plan to rent a jackhammer, push the smashed concrete in, and fill the rest with dirt and throw some seed over the top.

Broker did not have access to environmentals or appraisals because the bank bought the property back before foreclosure. broker seems to imply that the concerns are deffered maintenance and estimating capital requirements for roof and windows. broker also implies that seller will not accept less than $800k.

cash flow is currently negative due to being poorly managed IMO. the budget includes items like $1,800 for telephone when a phone cost 25-30 per month. the bigger kicker is there is an option to either rent with no utilities included (at rental rates quoted above) or to pay an extra $100 for water and electric included (units have central HVAC included in electric).

about 40 units have opted into this program giving a budgeted utility rebill income of around $4,000, the problem is that budgeted electric is over $4,000 and water is just over $4,000, and not only that but in September the electric bill was more than $8,000. I would get rid of this rebill program, but my concern is that in such a class C properrty with class C tenants this may limit my potential tenant market due to low credit & jobs etc.

It is in a hispanic area as our town has a large hispanic population working in the huge horse industry here. Not a war zone but definitely C class.

As far as properties in the area, there are no derelect properties, but just generally a C class area. definitely crime and drugs in the area but that is to be expecte din this neighborhood. Lexington is a thriving town of about 300,000(by MSA) and I would not rank this property in the top 5 hoods in the area. Maybe the top 10 - but you have to keep in mind that our "hoods" aren't like LA or something. It is working class hispanic, although many may be paid "under the table" in cash and there ar eundoubtedly some that sell drugs as a living. But I would not say that there is a negative employment trend, although the horse industry has been hit by this economy. I would not consitute the crime as increasing or employment as decreasing but probably relatively steady.

not yet talked with tenants or property owners but have just begun due diligence. That is the logical next step and I will keep you posted.

Cash flow situation will depend entirely on getting a handle on expenses. seems to be a lot of maintenance and a property manager that is getting paid $30k plus rent.

Getting rid of the utility rebill, property manager, and getting ahold on maintenance will be essential. Geurilla marketing campaing should do the trick as rents are at the lower end of comps.

I think the only reason it is still on the market is that the PL is negative and so whacky, one has to make many assumption about what they can do with this thing - but I absolutely still think it has potential. There is a 32 unit complex, but better maintianed, on the same street listed at 1,250,000

I am trying to avoid the typical 5 year balloon you find in commercial RE. Anyone have any experience with or recommendations of lenders who will go beyond to 10 or 20 years.

Although things are stagnate now, 5 years can bring a lot of change and I am concerned about inflation and rising rates when I goto refi.

Specifically I am looking at NNN investment in a 100% occupied class B three story office property in my area. Market rents could reasonably be estimated at $12/sqft. But even at $10sqft I think I can cash flow. $2,100,000 listing price.

Thoughts?

Jeff - you're right and all of it is with the intention of lowering the dollar in hopes of reviving our manufacturing sector (create jobs and increase exports) and decreasing imports. I don't know that we are headed for a period of global protectionism but it seems likely given that each country values their domestic needs as more important than others.

I still think that with all the cheap money in the system we are bound for inflation, that's why gold is the bet.

It seems ironinc, to put it mildly, that we are essentially fixing the problem with the same policies that caused it. Money was too cheap for too long in order to avoid this recession back in the early 2000's and now that it has hit, and hit hard, it seems the only answer is cheap money?

I think diversifying into some candian and aussie denominated assets is advisable and perhaps some exposure to emerging and frontier markets. The cheap money isn't being invested at home, that's for sure.

Kevin, you come highly recommended from esteemed BPers. Congrats.

My concern is that the property is currently 75% occupied. what sorts of implications might this impose, is this something you can work around?

Or is my only option to use the bank financing, increase occupancy and then seek a lower rate?

Getting fixed on a 5 year ballon 30 year am at sub 5% sounds very attractive - I can PM you from this point if preffered, but thought I would keep as much as possible out in the open to the threads for the sake of other BPers. Let me know.

Chris and Marc - Similar suggestions and a good idea. I would likely jackhammer the pool deck and then jackhammer at least a few inches down on the sides if the pool, fill the pool basin with the concrete debris and fill the rest with dirt.

I would be a bit concerned witht he drainage issue, how likely is it that would be a problem? I would prefer just to put grass there, would a tree be required to thwart drainage issues?

Also if i ended up paving new parking lot there, how deep do they dig to make a new parking lot? Might that me an issue as well?

Any other issues?

Perhaps I should rent a jackhammer and sledgehammer and goto town - or maybe rent one of those little jackhammer/dingo machines?

Then what, I can't just order a commercial dumster and throw away all concrete - they won't be happy about that - how do I get the waste hauled off?

I am looking at purchasing a 72 unit apartment REO in my area. The bank is currently offering 20% down, 300 basis over prime with a 6.75% floor on a 20 year amortization and a 5 year balloon. Apartment is currently 75% occupied and I know it needs to be 90% occupied for a period of time before a bank will even look at it. It is an apartment that will be acquired under what would be it's appraised value - especially with higher occupancy (IMO - it is asking 900,000 and should appraise for at least 1.5 if run right and higher occupancy).

I have a few more details on the deal under my post - "Apartment REO analysis" - if interested

My thought is that 5 years is more than enough to fix this thing up, get occupancy up and get my "p's and q's" in order to get conventional financing.

I don't think rates will be going up anytime soon, but the next 5 years is hard to predict.

Given a couple years to get things in order 1) What exactly should I do from the very beginning of ownership to position myself the best to get financing and 2) what kind of permanent financing options would be available to me and what are my chances of obtaining such financing. I would like to get a LT fixed rate and just buy and hold for cash flow and appreciation.

I know that 80-90% of balloons are renewed but I don't want to have to depend on this, I am afraid that the bank is just offering this financing to get the thing off their books. OTOH if I am a performing note with good LTV at that point, maye it won't be an issue.

But i still want to seek LT fixed financing, what are my options, and what do I need to do to get there?

Thoughts?

An apartment i'm analyzing for purchase has an old poured concrete in-ground pool that is out of order and use. It is a liability and I have no intentions of restoring it for use. My options (as far as i can imagine) are to fill it in with concrete or have someone jack it up. There is a slight possibility that I would like to use the space for extra parking so I am thinking jacking it up and leaving it as green space and leaving the option of turning it into parking lot is the best option.

I was wondering if anyone has any recommendations on which option to pursue, and more importantly whom to call for such services. If i want to jack the pool up and have it hauled off and filled in with dirt do I call a big contractor in the area with subs, a concrete contractor (they won't be pouring any concrete just jacking it up and hauling it off), or a commercial contractor, or just some guy with a jack hammer and a big truck? I am looking for the most economical way to remove this pool and fill it in with dirt and throw some seed on top.

Thoughts?

I have heard alot about using these at the "point of use". you can have tiny cheap ones installed beneath a sink or faucet at each outlet. this has some efficiency gains in not sending hot water a long way through cold pipes, but would require a decent bit of replumbing and wiring (if electric).

You run a cold line to each "point of use" and have a small tankless unit there.