All Forum Posts by: Mark Doty

@Dan H. thanks for the post...very much in line with what I was thinking.

@John Warren I’ll start looking for the right lender!

@Armando Payano

Good thing to consider. Thanks for the feedback!

@John Warren thanks for the reply! I used to live in your town before moving out west...do you know at what point lenders really look away from comps and at the NOI vs CAP? Since my example here is hypothetical, maybe it makes more sense to look at adding 4 more units or 6. And to make it work out here it would take a lot bigger down payment. Are 8 or 10 units looked at more on the numbers than comps? There are probably a number of variables that make sense to the right lender.

@Dmitriy Fomichenko thanks for the response!  

@Dmitriy Fomichenko, @JJ Chojnowski, @Todd Dexheimer@Joesiann Cortez, @George Blower

Nice thread you guys have going...I had a couple questions to add that seem in line w the discussion.  I’m trying to figure out if my eventual goal sounds feasible. 

Is it possible to use your own 401k and invest alongside it with your own cash in an LLP? Any distributions or equity could be paid out to the 401k as if we're any other partner. The intention would be to get into a larger deal than your cash alone would allow.

Could you open the partnership and have the 401k as a hard money lender to the partnership at a low (like 1% rate of return)?  Thinking here is that you should be able to lend out money at whatever rate makes sense.  Maybe a lower rate makes sense in some scenarios. 

Another question which you may have touched on...it sounds like some of the 401k money could be set aside and used in the liquidity or reserves fund for a property. Does that sound correct?

I have a hypothetical question for the community about purchasing a 4-plex that has been zoned for 2 additional units.This is a hypothetical exercise to identify gaps and valuations not currently under consideration.Feedback is appreciated!

The existing quad is listed for sale at $1.1M and a 5.3% CAP.Commercial multifamily in the area sells at a CAP rate of roughly 4.5%.The existing property is zoned to allow for 6 units and has available land to build an addition duplex for ~$150 per sqft.Assume 1000 sqft duplex at $150,000 and we'll build that into the loan.After expenses, the additional units will each increase the annual NOI by $14,400 = (Gross rent – operating expenses = $600x12x2).

Purchase Price  $1.1MM

Construction:  $150K

Loan amount: $1MM

Total for project:  $1.25MM

20% down: $250K

Pre-construction NOI: $58,300

Post construction NOI: $72,700

What is the estimated property value after construction?

• A.$1,615,555 = The post construction property value is $72,700 (NOI) / .0045 (Comp CAP Rate 4.5%)
• B.$1,371,698 = Post construction = NOI $72,700 / purchased CAP rate of 5.3%
• C.None of the above, but please explain

@Theo Hicks thanks for the response and additional comments!

@Alina Trigub thanks for your comments!

@Lane Kawaoka thanks for the insight...sounds like from you perspective it would be better to go after a minimum of a 1.25M property to obtain better financing, so that the loan exceeds that $1M threshold. Am I reading your comment correctly?

@James Lusk  thanks for the numbers. I thought it would have been more!