All Forum Posts by: Kim Hopkins

Lots of great insights here, thank you! I like the idea of putting in the LOI that the offer is based on the 7.5% CAP rate. At a bare minimum, this gives just a little ethical coverage in the case that the numbers turn out to be B.S. ("wow, no repairs ever?!").

Very interesting responses. A follow up question would be: 

What is your philosophy/practice on asking for credits based on the results of the inspection period findings? 

And do you consider any request for a credit to be "re-trading"? 

Say for example, once in contract during DD, you find items like 2 leaking HVAC's at $8k replacement value each, parking lot needs recoat, and 30% of shingles are failing. How would you proceed?

I have a very unofficial survey to conduct! 

For those of you buying CRE right now, I'm very curious to hear the following:

1. Your property type. E.g. multi tenant industrial. 

2. The lending terms you're seeing. E.g. 60% LTV, 6.75% interest, 5 year term, 30 year AM

3. What cap rate you consider "good"? E.g. 7 - 7.5% 

4. What your expected COC return is with your underwriting? E.g. terms above yield 5.5% COC.

I'm struggling right now. Was stoked to find a property with a 7.5% cap but b/c of the lending terms, my cash on cash sucks. Do need to take tax savings into account though. $1 in my pocket would be better than paying a gazillion bucks in taxes... 

Can't wait to hear what you're seeing! 

Ok this is what we usually do. I totally agree. Do you think it's fair to say in the LOI then that we don't retrade? I mean we don't retrade unless something is misrepresented or there's deferred maintenance that wasn't disclosed...

Hello! 

We have a commercial retail building in the 5 to 6 million range that we're looking to make an LOI on out of state.

typically we do not see the property ahead of time before getting in contract, Just online due diligence, so to speak.

In this case, we happen to have boots on the ground and had someone go by the property. There are some deferred maintenance items like a leaking HVAC against the back wall, some shingles in need of replacing, and a dent in one of the walls. It's nothing we would pull out of the deal for, but certainly something we would eventually want to evaluate and ask the seller to either repair or credit.

We try to pride ourselves on not retreading but at the same time we want to tie up this deal and it doesn't really make sense to get repair people over there to assess costs while there are other interested buyers and before we've made an LOI.

What are your best practices here? Do you put something into the LOI indicating you're aware of these items or do you tie up the deal and evaluate these as soon as you're in contract, and ask for a credit or repair at that time?

Thanks!

Kim

I agree. Not to mention, what NOI are we looking at? 2023 prorated? 2022? The intent of what I'm getting at is trying to make an offer based on stated numbers that I think are low. Any ideas on how to structure it better to avoid the issues you describe above?

Hello! 

We have a great prospective property we're looking at. The broker OM says they're selling it at a 7.5% cap rate and $5.7m purchase price. 

Based on our experience, We are pretty sure their expenses are understated (they're at 23% of gross income and almost always are closer to 30%). 

They also have a sloppy typo where rent roll totals $410k on the rent roll page but is shown as $420k on the page where they use it to calculate NOI and purchase price (which would make a huge difference in offer price!)

We want to tie up the deal and show them that we're willing to do it at a 7.5% cap rate on the correct numbers, but we can't get the correct numbers until we're in contract and we don't want to retrade If the numbers were misstated (that never goes well in our experience).

Has anyone ever written an LOI that says something like this:

Buyer and seller agree that the purchase price is calculated by applying a 7.5% cap rate on actual annual income and and expenses and any decrease in NOI actuals from the OM will be reflected in an adjusted offer price.

Any ideas? Best way to handle this kind of situation? 

 Thanks Tom! I was just logging on to say that I went with HubSpot (and upgraded within 5 minutes to get the customizable fields :-) 

It is absolutely fantastic!

Hello! 

I need to find a deal to buy this year like yesterday! Not sure it matters, but 4 to $6 million dollar deal, multi-tenant industrial or retail, preferably the former, small tenants around 2,000 ft².

I'm making a list from loopnet and crexi of properties and emailing the brokers.

I just need a very simple CRM that allows me to make a list of brokers, make a list of properties, and connect the two where appropriate.

I just needed to track emails and attach it to the correct person/property so that my VA can send follow-up template emails easily and we can all stay organized.

I know there have been a hundred discussions on CRMs And I've read them all but I can't discern if there is one that stands out as being super simple and free would be awesome too. I'd like to be able to set it up in a couple hours, which probably translates to 8 hours, but that's the intention :-)

thanks!

Kim

Well, in case anyone is curious. I FINALLY figured out all the mathematical connections between cap rate, interest rate, and what I call the "break even interest rate" that determines when your return will increase or decrease with debt. 

I created a portfolio wide analysis where I use all the "math" on our existing portfolio to assess property performance and analyze whether to: 

1. Do Nothing

2. Refi and Reinvest (i.e. keep property and buy another) or 

3. Sell and Reinvest. 

Here is a 6 minute video that walks through the process in case anyone is curious or would like to try to apply this to their own portfolio. 

Welcome feedback as always!

Kim