All Forum Posts by: Jeremy Vohwinkle

Joel Owens, Clearly, it's meant to be profitable. The restaurant plan has been in the works for about two years now, and our family has been in the business since the 70s. Haven't run a place entirely on my own, but I know just enough to be dangerous/stupid. :D

For the past year or so I've been looking to buy an existing restaurant that was closing or the owner wanted to retire, but I haven't found the right location to work for my concept, or for the right price. But when I discovered this opportunity I thought it would be a good way to A. have other parts of the property already generating income, thus subsidizing some of the operating costs of the restaurant, and B. have an out if the restaurant doesn't work since I could lease the space out or sell it outright without having to sell the other two properties.

Not afraid of working, so that isn't an issue either. So, I was drawn to this since it would allow me to pick up some investments while still fulfilling this plan that has been in the works for a few years.

Thanks. And yes, I should have mentioned that I would certainly go into it buying the properties and obtaining financing strictly as an investment and not even go into the whole restaurant stuff. I'd just move in at some point in the future after buying it as a tenant myself.

And you're right, no real comps in the area. I'll have to do some price per sq/ft calculations to see what that leads to. I know that most downtown commercial buildings are listed around $30-40 per square foot. With the property I'm looking at there's a total of about 6000 sq/ft, 1,850 of is making up the residential units.

Good afternoon, bigger pocketers. Just got back from touring a few properties and since I have not purchased commercial real estate before, I have some questions.

What I'm looking at is a downtown section of three adjacent buildings being sold as a package. Two buildings are single story commercial. The third has a retail business on the first floor and two second story apartments. So there is a total of 3 retail/office units and 2 apartments.

Right now, both apartments are rented along with the downstairs retail. The two standalone commercial buildings are vacant.

Asking price is $120k for everything, but the woman at the chamber of commerce told me that the owners recently moved out of town and don't want to manage it long distance and are willing to come down to around $100k.

With the three current tenants, gross annual rents are $17,000. If fully occupied, gross income would be around $24,000. Total property taxes are just shy of $5,000. Tenants pay utilities.

Now here is where it gets tricky. I'd like to use one of the buildings myself and put in a small BBQ joint. So, that's one less unit to rent, although I'd technically be renting it to myself so I guess it's a wash. So obviously, I want to buy a property that is solid as a standalone investment, but getting really juicy numbers is not as important if I'm able to also use the property to build my own restaurant.

How do the numbers look at a glance? The two big unknowns for me are insurance and financing. I have absolutely no clue what insurance on properties like these might be. Obviously, that's a key cost that needs to be factored in. And second, what would financing most likely look like? I am not familiar with commercial lending so I don't know much about rates, terms, etc. Obviously, figuring out monthly/annual debt service is another key number. But I would expect I'd be putting 30% down, thus $100k purchase price, $30k invested, $70k financed.

Anything to help me make sense of this would be very helpful. Thanks!

Thanks, guys. These are exactly the kinds of things I wasn't really thinking of off the top of my head. I knew the A/C would be a concern, but as Joel Owens pointed out, there could be a lot of far more pressing concerns that have been covered up if it's older.

I'll have to go look at the place in person to get a better idea, and more importantly, look at some of the local rentals to assess the A/C situation. Up here, homes without A/C are very common, and in many places, the norm. And given the house doesn't have forced air to begin with, I don't think it would be worth putting in anyway. But if all the other places renting in this price point do have A/C, that could really change things.

Good call on the taxes. I just looked it up and that was the annual tax rate for last year when it was assessed at just $27,000. Given the updates and higher assessed value for 2013, taxes should be closer to $2,200.

And I'll admit I took a stab in the dark with insurance. I mostly based it on the $1500 I pay on my SFR that's worth about double the value of this property, but I don't know if the fact that it's a duplex vs. single family home really skews the premium or not.

Hey, guys. So, I've been in search of my first multi-family and think I uncovered a gem, but I'm still new at running all the numbers so I was hoping to get more experienced eyes to take a look and see if I'm way off base, missing something, or if maybe I did find a genuinely good deal.

Here are the main details:

2,400 sq/ft brick duplex, 2b/1bath each unit, fully renovated, new hardwood throughout, tenants pay utilities, etc.

List price: $79,900
Expected purchase price: $72,000

Initial investment:

25% down: $18,000
Closing costs, inspection, etc.: $3,000
Improvements/Appliances: $5,000
Total cash outlay: $26,000

Annual expenses:

Property taxes: $750
Insurance: $700
Annual maintenance: $500
Advertising: $100
Property management: $1540
Mortgage: $3,283
10% vacancy: $1400

Rents:

Going rents in the area for similar properties of this square footage in the neighborhood range from around $700-$950/month. So, assuming both units rent for just $700, that's a gross rental income of $15,400.

Crunching the numbers, that gives a NOI of around $11,600. Less mortgage payments, and the net cash flow is around $8,350.

So, cash on cash ROI is about 32%?

That almost seems too good to me, so I'm wondering if I'm missing something. The most recent assessment puts it at around $85,000, which I don't doesn't mean much. But recent sales I could dig up show homes of similar size within a few blocks have sold for anywhere from $65k to $120k. In fact, a few homes are listed just a few houses down at between $134k and $190k. The only drawback, that I can see, is that it does not have air conditioning.

From what I could dig up, the owners are also owners of a custom cabinetry company, so I'm guessing they bought a fixer-upper, used their skills to finish the house nicely, and are now flipping it.

To give an idea of the quality of the rehab, I've included a few pictures. It looks very nice.

So, what do you think? Do my numbers make sense? Am I missing something obvious? Is it a decent deal?

Thanks, Steven Hamilton II. It's a property tax foreclosure, not a bank/mortgage. So yes, free and clear, and the county/state would be taking it.

Doesn't matter now because the deal blew up after our meeting today. After a lot of talking I discovered that it's all an intertwined family affair. The tenants are family, and they want to get out of business if the rest of the family can sell the building. Not only that, the seller informed me that they made a partial tax payment a few days ago and plan on catching up before the March deadline. So, it looks like they would not be as motivated by the foreclosure as I thought.

The price they are asking for the property is still not a bad deal given what similar properties have sold for, but the fact that the long time tenant would be leaving with them, plus the fact they want a cash deal, it's not something I want to entertain. Who knows how long it would take to find a new tenant and begin positive cash flow.

Although if they do end up not paying the taxes on time, it will go up at the tax auction this fall so I'll keep an eye out for it and maybe stil snag it for a good deal.

Oh well, on to the next one.

A few weeks ago I heard from a friend of a friend about a small commercial building with long-time tenants running a business, and they want to sell mainly due to health reasons.

Long story short and after a lot of research, an older couple sold the building to their son and his wife via land contract back in 2004. A year later, the son's dad dies and the property is deeded to his estate. A few years go by and the son fulfills the land contract and owns the property himself. Then there's a gap in recorded documents (at least from what I can find) and as of around 2007 the estate owns the property again, although not sure how they regained ownership.

Anyway, the son wants to sell because his mom is apparently in bad health. I've also discovered that they haven't paid property taxes in a few years and the county has a certificate of forfeiture on the property and they only have until March 31 to redeem it.

Obviously, this is a very short amount of time, and the sellers are clearly motivated due to the situation. Obviously, you don't want to take advantage of someone, but how aggressive do you get when thinking about making an offer? Their asking price isn't too far off of market value, but could probably come down a bit. But knowing what I know now, I'd clearly like to offer a lot less given the circumstances.

Just curious what your thoughts are. I have a meeting with the son in a few hours, and don't anticipate making an offer today because I need to get a copy of tax returns and other financials first, but given the short window of time to act, I need to be ready to make a move if everything looks good.

That's a pretty broad question. It really depends on your goals. Do you want relatively quick short-term income? Do you want to build a source of largely passive long-term income? Do you want to build up equity in real estate that you can rely on in the future? Do you just want to supplement your full-time income? Do you currently have money to invest? Do you have no money to invest? Do you have a lot of time, or just some spare time?

As you can see, there's no best or worst option when it comes to real estate, and different methods will achieve different goals. What's great for one type of goal might be out of the question for another method, and vice versa. So, first identify what you want to get out of real estate investing, and then you can look at the methods that will help you reach that goal.

Assessed value or not, the agent isn't really setting the price. That's up to the seller, and even though a good agent will try to help the seller reach a reasonable listing price, if they insist on listing it at a high price, they will.

As far as her honesty, she probably knows it's listed too high and has a seller that doesn't want to budge. But if it's also not generating any interest, she knows that by at least getting some people interested in it, at a realistic price, the sellers might be willing to come down to make a sale happen.

There is a commercial property I've been trying to buy for over two years now with sellers like this. I love the potential and the location, but the out of state owners are completely insane. They are asking $420k, but I've dug up the last three times the building has been bought and sold, and it's been for between about $120k-$175k over the past ten years. Comps in the area would put a value right in this ballpark as well. On top of that, it's always been a bar/grill type place, and they have completely gutted it, from kitchen equipment down to the outdoor deck/patio.

Still, I'd buy it in a heartbeat around $150k, but even the listing agents (and there have been a handful over the years) just kind of laugh when we talk about the price because they know it's absurd. So, I guess I'll just drive by this vacant building every day and keep calling to see if they will ever get realistic on price. It's crazy town.