All Forum Posts by: George Lekas

Hi, John,

       They offered investments in 2 properties late last year- 5201 West Washington Boulevard, and 7752 South Muskegon.  The one on Muskegon had sold for about half of what their valuation was, less than a year earlier.  When I pointed that out and asked if they were saying that a million dollars in improvements had been made on that property, there was no response.  I was initially interested in them because of the interest rate- I only pay my investors 8%!  My opinion , and only my opinion, is that, based on my experience with their team, is that a person should proceed with caution, and only after close scrutiny of their offerings.  I echo several other posters in wondering if anyone here has had any success with these folks?

Kyle,

       Lots of good advice here!  Let me add some.  Here in the Midwest, these facilities are usually referred to as Community-Based Residential Facilities, or CBRF"s.  The licensing requirements are strict, for obvious reasons, and they vary depending on the number of beds in your facility.  You will find a lot of folks who want to open four or eight bed facilities, as the licensing requirements for places of that size are less stringent than the larger facilities. Employee turnover is high, due primarily to the low wages prevalent in the industry.  You have to allow more in your vacancy calculations, as a CBRF is more often than not a person's final move.  And you should make a serious effort to limit the number of Medicaid residents, at least until you are experienced enough to understand the nuances of how you get paid from the government.  

       Having said all that, these facilities can be cash cows, and their future is nothing but upside!  You've heard the fact that 10,000 baby boomers reach the age of 65 each and every day, and will continue to do so for the next 10 years or so?  What's not to love about that?  The facility owner who is experienced and patient will be well positioned for the foreseeable future.  Please bear in mind that you alone decide what type of residents you wish to accept, so elderly folks who can take care of most of their own needs are obviously less maintenance.  Also, your rent can be whatever the market will bear for your private pay residents.  Additionally, although their care is more intense and staffing turnover is even higher, dementia and Alzheimer's residents pay an average of $5K per month for their bed.

       I strongly urge you to pursue these facilities as an investment.  You will be happy you did.   

I was just wondering if anyone has had any dealings with this company?  They promise 12-15% returns, depending on how much you invest with them.  They always seem to be offering properties in bad neighborhoods, mostly in Chicago, and claim to have never had a foreclosure or default in over 600 transactions.  When I asked about specifics on one of their offerings in December, I got an e-mail saying that their "finance guy" would get back to me with details.  I still haven't heard from him.

Hi,

Thanks, everyone, for all the input. Here's more information:

Benjamin- I'm not really sure what I would do with this place! Hotels are just not in my wheelhouse. I specialize in assisted-living facilities, and was considering that as a possibility.

Bill- It's been vacant since January, allegedly because of a medical emergency-type issue.

Nik- It would have to be all cash, as all the banks I have spoken to say no way!

Chris- There are only 5K people in the entire county! From all outward appearances, the demographics would not seem to support something this big. On the other hand, some big hotel outfit did the market research and thought enough of this area's tourist reputation to build a 90 room hotel- at least, that's what I tell myself! ( And there's another 70 room hotel right down the street!) This was a branded hotel, a 2 story elevator building with interior corridors. There have been over $200K in improvements in the past year. They updated the plumbing, heating, electrical, and fire alarm systems. There are new flat panel tv's, new electronic door locks, a new ansul system in the restaurant kitchen, 2 new handicap- accessible restrooms in the lobby area, new water saving toilets and smoke detectors, and new wi-fi capabilities throughout the hotel. The indoor pool was repaired as well. As far as highest and best use, well, that's the $64,000.00 question. As I mentioned before, I specialize in assisted-living facilities, but I have never had one that large, and I have no clue how I'd fill it in an area that is so rural!

Tim- You are so right about those real estate "reality" shows! I'm still looking for "Hotel Impossible"- can't wait to check that out!

Again, thanks everyone for your input, and I'll keep you posted when I decide what to do!

Hi, everyone,

I need some input. My broker sent me an opportunity to buy a 90 room, full service hotel in a rural area, and the price seems low- the owner wants $475K. The biggest problem for me is: how do you comp a closed hotel? If it was up and operating, I' m sure the purchase price would be much higher. I am fighting the urge to just go ahead and pull the trigger right away based on the price, and would sure appreciate any advice from you guys. Thanks.

Okay, let's say that you just plunked down 100K on some piece of property. As the professional investor that you are, what monthly cash flow figure would you find an acceptable return on that $100K? I asked that question at a REIA meeting in Chicago and was kind of surprised that most of the attendees there said they'd be happy with $150.00 a month in positive cash flow. I think that's too low. Any thoughts?

Thanks for the input guys. The current market value was determined by the recent sale of a comparable property. I have a spreadsheet from the seller, and tax returns are available after an NCND agreement is in place. What else should I be looking for?

Mobile home park on a lake in central Florida. Market value, 3.5 million, purchase price 2.6 million. Net annual cash flow, $575K. 91 mobile home sites, 36 RV sites, 16 rental cabins, boat rental and launch site, food and liquor sales, etc. What other information do I need to see if this is a good deal or not? Thanks for reading this, and any advice is appreciated.