All Forum Posts by: Michael Klinger

Thanks everyone. @Bill Exeter, thanks. You understood my question perfectly and that was the precise reply I was looking for.

I may have misread. I was basing my input on the subject of the thread, which said loans under 1 million. I see now it might be more the purchase amount. Oops.

Don't know much about them, but I have seen on the Fannie Mae site that they have a multi-family small balance program that starts as low as $750,000.

I am just now going on the market to sell owner/user office. I expect I will 1031 to multifamily. That is my conclusion on replacement type after researching all options for the last few years. I have a pretty good grasp of the the 1031 rules. One area of fuzziness:

Can I...

Explore replacement properties, and if I found a good one, go so far as getting into a contract on a replacement property during the escrow period of my current property?

Then if all seems smooth and happy with that deal, circle back and identify one I have  in contract one before the 45 days, rather that burning one of my picks (in the event that the deal dies)?

Or do I have to identify first, then contract?

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Thanks everyone for your input. @Michael Lee: Say what? I'm just a guy trying to figure things out for my own situation. Not an agent, not evil. But apparently misunderstood. Sigh.

I have a building that has been my owner/operator facility in Los Angeles for my small business in a sector that is going through hard times for brick and mortar. I've owned it for 14 year and have significant equity from both pay down and appreciation. I tried selling 3 years ago and the market wasn't ready for my expectation on price. 

Things are better now and I plan to put it on the market again very soon. When it sells it will likely also be the closure of my business, and so I will be relying initially almost entirely on the rent that I would generate from whatever I end up with in my 1031 exchange, so income versus other ways to gain in real estate is my initial priority.

In thinking about it and looking at options and poking around for the last couple of years, I am strongly leaning towards multi-family. Since my initial goal is income, I am attracted to cap rates that can't be found in CA and hard to find in New England where I live 1/2 time. Instead I keep circling back to the offerings I see in places like Ohio and Indiana. Obviously this means I would be an out-of-state owner and would be relying on good advice from brokers/property managers, etc to choose wisely.

But I am hands on person as well and the idea of being able to make later decisions about the property to help improve its return is also attractive to me, compared to a NNN lease on some other kind of property.

I'd say that I would be perfectly comfortable with a working class property that is just a middle of the road workhorse. No war zones, and not in need of rehab or re-boot, ready to go as-is, but could using some tinkering over time.

My random questions are:

1) How is building class really determined -- aside from the obvious? I often see warnings to stay away from certain classes (if not to state the obvious on war zone class). I see classes listed sometimes in listing, often not. I can see pictures and get an impression on my own. I've seen guides that base classing basically on age, but that measurement seems out of step with the age of most buildings out there in 2017. A huge number of building are old and getting older, but still totally viable properties. I visited several of these cities during a cross country trip and that does a lot of good for "gut feelings" so it seems somewhat random what class a property ends up with sometimes. Thoughts? Importance?

2.) Similar question about the specific quality of a neighborhood. Eventually a visit is in order, but before that step, are there  recommended resources for getting the scoop on particular neighborhoods within a city? Someone in this forum linked to a guide one done by someone for Cleveland and that was excellent, but I think I've ruled out that city for me. I'd be interested in a similar resources for other cities.

3.) Should there be concern about cities that are declining in population? For example Indianapolis and Columbus and Lousiville are growing, but Cleveland, Cincinnati, Dayton, Akron and St Louis are are shrinking.

I have a lot of questions, but don't want to overstay my welcome. So that's it for now.

Thanks,

Mike

@ Shaun Reilly: Well depending on how the market responds to my offer to sell my building , it may come to keeping it. However If it sells well -- it will be an opportunity for me to "step up" and buy more and create the opportunity for more cash flow than I could with what I currently own. At least that's how I see it. Plus I am interested and have enthusiasm for finding slightly creative ways to tweak the new properties I acquire to be more profitable. This will be especially true as I am winding down my current occupation/business, I will appreciate having a bit of a purpose for the spare time on my hands, until I figure out what I am going to do with myself in my next chapter.

After 12 years I am winding down my business and relocating from Los Angeles to Massachusetts, for a life overhaul. I have an owner/user office building that is going on the market now. I have always had 1 and sometimes 2 tenants (besides my operation) in my building depending on the expansion and contraction of my operation. The time it takes to sell the building will dictate when I close up my business. My wife has already relocated and is working and living (renting) in the area that we are moving to. Our long time LA house is on the market and will likely close in the next month or so on that. That cash will earmark to purchase a home next year.

I will 1031 exchange the building. My instinct and genuine personal interest is to move in the direction of the multi-family business. I expect my net proceeds to be between 800k and 1+million depending on sale price of my space in LA. I have learned that I will have to exchange with the LLC that I own the building in which is a California LLC. It is unlikely that I will buy apartments in the area I am moving to as I desire higher cash flow than might be available, so i can live off that while otherwise I re-invent myself. And so I expect to have to look markets other than California or Massachusetts. With a good property management company, I am quite comfortable not being across the street from it. With the amount I have to work with I could potentially end up with 2 buildings with many units in them.

The main point of my ramble is I want to be talking ahead of times to lenders, and I do desire to leverage out my proceeds to the point that is reasonable and profitable and with 25 percent down that could be 3.6 to 4 million in purchases. However I am not clear if my track record as a business owner and of a commercial building is the kind of experience that is expected of someone trying to leverage out to bigger multi-family buildings. I otherwise have good credit and other assets beyond the building and the house and multiple years of profitability in running my business. Do I just start talking to lenders in one of the potential areas? Or is there a more generic "rule of thumb" without spinning someone's wheels too much? Which cart goes before which horse?