All Forum Posts by: Mark H. Porter

Annual NOI will be $29,280 which gives you a 6.7 cap. Not great in a high interest market. But…

Take away one of the incomes as you'll be moving in. The impact of that depends on if you'll be renting out what is now in our primary residence when you move.. You'll be removing $10,620 of you income taking your NOI to $18,660 with a cap rate of 4.2%. Even at a 5% interest rate at 30-years fixed you'll be out of pocket $500-$600 per month.

If it works for you then great.  I wouldn’t do it.

Like many others on here,  I’ll tell you my mantra for building wealth - EVERYTHING is for sale.  

Right now you have a bit of a dilemma. Interest rates, from legitimate banks asking no points and reasonable fees, is over 7%. Though you have reasonable equity you could pull out in a 1031, banks have tightened up on commercial lending with LTV's (70%) and DSCR's (1.25) and some even ask for a deposit account worth 10% of the loan. This isn't to say it's not worth it, you just need a good deal more effort than in the past.

Cash is king right now.  Interest rates have stalled a lot of sellers who would be exchanging low interest rates for much higher.  Get a very good realtor experienced in 1031’s, a bank that knows what they’re doing, and @Dave Foster to guide you through the process.

Here in MB I projected my 2023 growth of the 2021-2022 growth.  Wrong move.  Last year was a fluke that wasn’t expected to be replicated due to the rising costs not stretching the vacation dollar as far.

He’s giving you $4,200,000 loan for $480,000 per year for 10 years  For a vacant building needing $2,800,000 in renovations so I’ll estimate 3+ years to stabilize after everything is accounted for to even get started.  Not to mention some bank giving you a $2.8M construction loan while I think you have limited experience in this.

You sure you want to take this on?  I’ve been playing this game for 25-years and wouldn’t touch this with banks the way they are right now.  Your borrowing fees are sky high.

Artie - I just closed my 1031 by purchasing a strip mall in Raleigh last week.  Solid cap rate due to it not being in the most desirable area of town.

As I mentioned almost a year ago, to me, it’s all about the before-tax-cash-flow.  I know and understand the ratios people like to use, but that positive cash flow is a risk moderator as it allows you to handle the unexpected capex with ease.  Good luck on your purchase.

Set yourself the goal of having all three of your 1031targets close to a PSA before closing on your downleg.  45-days goes by FAST when you have to get due diligence done prior to making a decision.

You already have your QI identification in order?

DSCR loans are becoming part of the approval, not the exception. Don't be surprised if the bank wants a 75% LTV AND a DSCR of 1.25.

I really have no issue with this. Because the bank faces less risk with the 1.25 DSCR approvals are quicker and their insuring my cash flow is higher.

I disagree. I make FAR more in value on my LTR than my STR. Why? Because LTR are value by Income Approach why STR are valued by comps. This is because of who buys them.

STR's are predominantly purchased by very small investors. Banks that finance these will normally value them on what other "Like" properties sold in the building or nearby, regardless if the unit earned more revenue.

LTR’s are looked at differently by a bank.  If you have a property with the same number of units and bedrooms but with greater revenue you will be valued higher.  This is where you make your large paybacks - higher incomes, lower expenses.  The difference between the two is higher cash flow and higher evaluation.

Let me tell you what I realized a LONG time ago, it’s all about the the cash in your pocket at the end of the month.  This is called by many names, but I call it before-tax, or pre-tax, cash flow.

Take your Operating Income, subtract the Operating Expenses, and you get Net Operating Income (NOI, used in the cap rate calculation). Subtract from this your annual debt service (your total annual mortgage payments) along with your CAPEX set-aside (2-5% set aside for capital expenditures). This gives you your BTCF.

Banks now make sure you make money in the property. Because many banks are only doing 70% LTV they are also demanding a 1.25 DSCF. This means if your mortgage payments are $100k per year, your NOI must be $125k.

6.5% cap stinks on a million dollar purchase financing $700k at 7.5%. Run the numbers to see what it would take to make a 1.25 DSCR. You'll have $68k in mortgage payments with an NOI of $65k. You're upside down.

Like others who may have read this, I can’t help but chuckle and say welcome to the service world!

I had built up 55 LTR units before deciding to start selling them under 1031’s and purchasing a couple of large beach houses and commercial strip malls.

Now, the LTR’s were no piece of cake.  I had to deal with drunk boyfriends, unbelievable damage, noise complaints, lost jobs, no money at Christmas, tenants that one moment had a cookout together then called me to complain about each other, the list could go on.  20 years of this made me a little numb.

With two oceanfront luxury beach houses on STR you would think the people that could afford the $6-19k per week would be more responsible. Not on your life! I've had them install bidet seats that then had to be removed, ruin linen by using bedspreads on the beach, put up a dart board on my siding, tear the facing off a couch because they thought it opened like a trundle, break lamps, etc…

It’s the life we’ve chosen.  Just make sure to inspect when they move out and take pictures of any damage.   Also, NEVER forego getting the full security deposit.