All Forum Posts by: Account Closed

@Eric C. This depends on the type of deal, rehab, rental etc.. You can have asset based lending such as with hard money lenders with lower downs but terms are generally 6 months to a year, which is different from a conventional term of say 25 or 30 years. Its project specific.

@NaDean Bowles It seems you are referring to REG B; are you saying Arkansas law contradicts federal directives on this? Typically I thought if say you qualified as an individual and provide lender such proof, they can't just coerce you to arbitrarily obtain say the signature of a spouse or ex to cosign since that doesn't make you qualify for a loan that you hadn't initially. Makes sense? Also, are you the sole beneficiary of the trust you mentioned you normally use for purchases or are there others beneficiaries? Of course hard money can be a different ball game compared to conventional but typically that should mean looser requirements on such matters.

@John Widlacki In the metro area where you reside, you want to contact as many of the hard money lenders that you can find,  get from them information about their rates, process, term etc. There often may be subtle variances and more importantly find good deals.

You mentioned having experience with the construction industry and with inspection so here is a question.. I happen to be in the market to buy a hotel...although you may be in a different market, based on where you reside or work etc... what is typically the industry average cost per room for a new hotel construction project? Need to get estimates using different valuation approaches and it appears replacement cost id widely used in some circles.

May have to create a thread for this but if you have any info you can respond.

@Jason Behn Yeah Jason, whats with the encyclopedia? You actually expect investors to read through this? :) 

Familiarity breeds contempt (in some cases). You want to detach yourself as much as possible from the deal at least at this stage. By that I mean you want to have an entity unknown to the seller, like a realtor contact seller, make offer, negotiate for client etc. until things get firm and serious.

Sometimes the seller may disrespect you (or your offer) just because they can't fathom the fact that someone they are/were renting to is now trying to buy the property? Or they themselves (seller) may not want tenants to start getting a glimps into their financial affairs etc. or to feel there are financial issues brewing.

Of course a motivated seller may not give a flip who the buyer is but unless you are certain, get a neutral entity to get the ball rolling at this stage.

@Michael Glaser In most markets, bank owned foreclosures can often have thin profit margins.  Banks are typically quite informed about the market and values and aren't typically in the business of loosing money. Unless they are just trying to lighten their portfolio of repossessed assets to keep in line with some corporate target number, they will often sell it very close to market value. 

Some banks can keep a repossessed property on the books and unsold for years if the property doesn't fetch a set minimum price at auction. 

You also have other investors at an auction, bidding the price up to actual market value so its a strategy that rarely provides unheard of profit margins. 

This being said, there are those who utilize or prefer foreclosure auctions to other strategies. The banks however know that its very easy for investor to get caught up in emotional bidding which works fine for them.

@Jay Hinrichs However you slice it, there is still the same factors and dynamics in play. RE prices in Vancouver and Toronto got so high apparently it appears the government there felt it necessary to step in and regulate prices by imposing a 15% tax on foreign buyers.

This doesn't mean this is happening in every market in Canada. Vancouver is one of the most dense areas. Land area of only 115 square kilometer and 631,486 living in it equals about 5,491 persons per square kilometer. Toronto is about the 6th most dense with 630 square kilometer and 2.73 million people living in it or about 4,334 persons per square kilometer. This explains why the market there have in recent years appeared to be on speed.

If you compare this to say Hamilton, you see a different picture. Land area of 1,117 square kilometer, population of 536,917, and only 480 people per square kilometer. So average prices in Vancouver ($864,500) and Toronto ($755,755) is materially higher than in Hamilton ($414,476) for such reasons.

The same in California. Prices and conditions  in San Francisco will tend to give California as a whole a bad rep but there are still nooks in California, 3 times less than the average price in SF. You just may spend some time in traffic to get around which has its own cost.

@Joseph Gozlan This is funny... perhaps if you are having trouble with the national rate, we should be going global with this? Lets see... apparently in Europe occupancy rate was 68.8%, Asia 68.6%, US 64.5, Middle East & Africa 63.3% in 2014 ... seeing any commonalities with global consumer behavior Jo? https://www.hospitalitynet.org/news/4073336.html

Not sure if I should get technical on this but to clarify... macroeconomics has to do with the study of things like interest rates, money supply, inflation, productivity levels etc. and how these factors affect the economy., it has everything to do with real estate and more. Microeconomics is the study of how individuals and firms make decisions and allocate resources-- understand the distinction.

You assumed I didn't look into local hotel occupancy rate which suggested 70-75% in most recent year but historically, the rate hovered somewhere in the low to mid 60s also... so the recent spike is suspect; as a buyer  in this case, you use the lower conservative national average over a report by the economic development department of a city that may be inflating the numbers to attract investment dollars to a region. The seller of course would want to use a higher rate.

Look outside before you look within. Know what is going on around you, around the country (or globally for that matter) to be able to better assess local value make sound decisions. 

By the way, reports may suggest a city has a certain occupancy rate, that doesn't mean you buy a property anywhere in that city and by default you also get that rate?  I  tend to deal with the median whenever possible because averages often skew things.

The nightly rate data was based on data from at least 20 hotels within a 10 mile radius from the subject. The only issue is that many of them were offering discounts which is almost normal with the business. As a buyer, I of course would again rather base price estimates on discounted nightly rate data than to use inflated prices.

Also, what the asking price is compared to the industry, to me, is relevant - not irrelevant as you suggested. 

Regardless of whether or not it meets my personal hurdle rate or not. If the industry norm for hotels is revenue of $20,000 per room for instance, why would you be looking at a hotel with revenue of $10,000 per room? That is half the industry average. For me that is a material factor in making a decision.

@Michael Kugler There is 'nightly rentals' in the vacation rental space? Sounds like a hotel business model.

@Thomas S. The reason certain areas in California experience seemingly abnormal growth simply has to do with demand and supply in some of those markets. 

Think of it this way.. Canada as a country has a land area of about 3.85 million square miles which is larger than the US (about 3.7 million square miles); but there are only about 35 million people living in the referenced area there in Canada.

The State of California in contrast has a land area of 163,696 square miles but almost 40 million people living in it. You have more people in California than in all of Canada squeezed into such a small space. Heck, this might even explain the earth quakes.

When you have a situation where in some areas in CA, they technically have no buildable land and have to tear down a structure to build anything new, factor in just based on population there is likely to be more millionaires and billionaires in CA than in say North Dakota or Vermont... prices will have a way of going up.

You have a scarce resource (land) in a 'free market' where the primary method of determining who gets what is the price mechanism. Its the invisible hand (Adam Smith), not entirely irrational exuberance.

@Dave Foster That would be quite a loop hole -- investor utilizes the 1031 route, legally evade taxes, but refinance new purchase and get the cash out anyway.