All Forum Posts by: Mac Caspersen

Hi BP,

I've been cold calling mountain communities in my area looking for a short term rental property. One person I contacted told me about the neighbor's house that has been vacant since the owner died and it was passed down to the kids. He shared the contact information of the bank representative who managed the trust. Its a large nationwide bank.

I spoke with the banker who gave me the following info:

(1) The property is in rough shape. Apparently there was water damage before COVID and they removed all the flooring. Its needs updates to the kitchen and bathrooms as they're original. Its been vacant for many years now. She said the HVAC worked last time she was in the property last fall. Roof and siding may need repair or replacement.

(2) The bank wants to list the property on the MLS. I told her it sounds like a good fit for an investor given all the work it needs and asked for an appointment to walkthrough, but she declined and asked me to check back in in 30 days. I don't totally understand the structure of the trust. The bank owns the property and makes the decisions about its sale, but there are beneficiaries who are involved in the decision making process. The bank couldn't disclose whether the beneficiaries would receive any of the proceeds.

This would be my first deal, and it sounds like there may be a lot of risk, moving parts, and potentially a good upside. The property is on a river with river access in a very popular short term rental destination. If it was bought at a good discount and fixed up, it could be very lucrative. 

Does anyone have any experience working with a bank in this scenario? Would they ever work with an investor off market or provide a discount above the estimated repair cost to restore it? Any guesses about how these "beneficiaries" are involved and what their decisionmaking power is?

I am starting to learn about commercial and multi family investing. I am pretty analytical and have owned and sold my own business in the past, so I have a good foundation for how the math and metrics should work.

My understanding is that commercial and multi family properties are valued as a function of NOI. I have looked at probably 2 dozen properties on loop net, and all of them seem to use comps to arrive at their list price (with a couple exceptions). These are all kinds of different commercial buildings from small office to retail to self storage.

What am I missing? Where are all the valuation calculations I’ve heard of and read about?

@Niña Phelps Niña, good on you for getting started so young! I wish I had an interest in real estate investing at your age. If you’re focused and do it right, you’ll find yourself way ahead.

I’d say the most important thing to do right now is to identify what your goals are. There are a lot of things you can do with real estate. You can flip houses, wholesale, but and hold, invest in notes, etc. There are also different vehicles within real estate - single family, multi-family, land, commercial, etc.

There are a lot of options to get involved with, and it can be overwhelming. My advice is not to try to learn everything at once; instead, pick the method and vehicle that is best aligned with your goals. Over time, you can grow to learn more and more in the industry.

Once you’ve decided what aspects of the industry will help you accomplish your goals, assess what resources you need to start investing there. Resources may be your network, funding, time, knowledge, etc. Develop a plan to put those resources in place and start executing.

You'll learn the most once you get your hands dirty. Don't feel that you need to spend months trying to narrow down your vision. Jump in as soon as you can and as often as you can (even if it is with small things like analyzing deals on the MLS).

@Ferry Vendy As other have mentioned, I think it's all about where you source your deals. MLS is especially poor for find deals right now because the supply of houses is way down and has been since COVID. Therefore, buyers are scrambling to get into a fewer number of listings and driving prices up.

That being said, in off-market properties you can still find great deals, so it’s all about setting up systems to find those deals. Have you interacted with any wholesalers in the neighborhoods you want to invest in?

@Zach Adams I am not a lawyer or anything, and the law differs from state to state, but a few things I would think about: is an owner-move-in eviction an option? Can you do a cash for keys type situation to get a tenant out? Can you find a deal where the tenants are on a month-to-month lease (or no lease... I just found 3 tenant-occupied properties with no lease in place) and make the purchase contingent on one tenant vacating?

Once you land on an option that you think makes sense, give your plan to your financer to ensure it works with their rules.

@Sarah Bancob Looks like a good deal based on this info. The purchase price to rent ratio seems suspiciously great to me, though I’m not familiar with your market in particular.

It would be helpful to dig a little deeper. How are you getting your rent comps - is that the current rent rate the units are fetching? What is the age of the property? Are the structure and the primary systems (water, HVAC, electrical, etc) in good shape? How does the price of this property compare to other similar properties, and if it’s different, do you know why?

@Darius Ogloza Makes sense. I think we are focused on the investment potential. We couldn’t own this much house without a renter subsidizing the mortgage, so we put in an offer accordingly.

@Jaysen Medhurst Thanks, this is exactly what we did. I haven’t heard back from the seller yet, but I feel good about the offer either way.

I also asked my agent about looking at the permits pulled if we get the house under due diligence - I love that tip!

My wife and I found a house that we want to live in and raise our kids in. It is a nearly 5,000 sq ft ranch with 2 BR upstairs and and full mother in law suite in the basement. The basement has 2 bedrooms, a full kitchen, full daylight, a garage, laundry, etc.

Our realtor expects we can rent the top for $2000 and the bottom for $1500, so a total of $3,500 in rent if we were just to rent it out. Because of that, I plan to hold onto it long term. For now, we will be living in it and my mother will be living downstairs for $1,000/month to help her out and to help us out with the kids. That would still make our monthly housing costs very cheap.

So all the numbers look good, except our realtor thinks the property is way overvalued. It is a flip that an investor bought a year ago and is making nearly $150k on (excluding costs), and they’re now selling for about $400k. Our realtor says it’s unique and comps are hard to find, but she thinks it’s a crazy market right now and this property is actually worth $330-$360k.

What do you guys think? I of course don’t want to overpay since things are so hot right now. On the other hand, I can make the numbers work easily, and I plan on holding it long term. I suspect it will be a competitive bid, even at the high price.

@Jingru Sui Thanks! Do they typically post their jobs with “syndication” in the title or job description? Do you mind if I ask what special skills you have that got you the job?