All Forum Posts by: Michael Wolffs

David,

Since we're both in NYC, this question is probably more appropriate for you.

What is the average size loan you make?

Thanks,

Mike

I should be there.

I see a few issues and techniques there.

First, you're going to need to put together a team in your target market - brokers, a lawyer, a manager, maybe contractors, an accountant (that can be local to you), etc..  There are probably people here who can hook you up.

For brokers, I'd go on Loopnet, and see who's listing properties in the area.  You may not want the properties they're showing on Loopnet, but you can use that as a way to introduce yourself, let them know you're serious, and that they should contact your when they come up with something that fits your profile.

Alesha,

Before you do anything, you need to go over the process of how to execute a commercial real estate transaction.  Part of that process, and something that should be built into the sales contract, is what's know as the "due diligence period."  This is a period when you can inspect the property and records, and if you don't like what you see, back out of the deal.

Before the sale, brokers and owners will make all sorts of representations as to the condition of the property, and it's financial situation.  These can be complete fiction.  You can ask for documentation.  But before a deal is made, they may or may not give you anything.   This is the tire kicking phase.  However once you've gone to contract, and given a deposit, they now know your serious, and if they don't give you the documentation you want, you'll back out, and they'll have to find another buyer.  

As soon as the contract is signed, you can give them a list of everything you want.  You'd include things like, Annual financial statements for the last two years, current up to date financials, copies of all the leases, copies of the last years bills, copies of the last years bank statements, copies of contracts in force on the property, and more.  You'll need a good accountant and lawyer in this process, they can give you a full list.  This is also the period where you'd have the property inspected by a professional inspector/engineer.  By the time your done, you should have a good idea of the true financial and physical state of the building.  You MUST get this done before the end of the due diligence period (usually thirty days.)

It' is somewhat likely what you find will not match the representations made prior to the execution of the contract.  Between the accountant, the inspector, maybe a contractor, and yourself, you can put a dollar amount on the discrepancies.  You can then go back to seller/broker, show what you've found, and demand either an adjustment to the price, a payment back at closing, or some combination of these, totaling the amount of the discrepancy.  If they do this, you proceed with the deal.  If they don't, you have to decide whether to cancel the contract and walk away, or not (at your option.)

Triplex (and part of the project may be squeezing in a fourth unit.) 

So I take you you like the idea of the architecture being outside the contract?

I've bought a property I need to get rehabbed.  Once I bought I immediately started contacting contractors for bids.  I got some, but some of them said the needed plans do do a good bid, and I needed an architect.  Some had their own, and offered to wrap that cost into the contract, basically being a one stop shop.  

But this got me thinking that I did the process a bit bassakwards, and should get my own architect, get the plans, rebid the actual construction work based on the plans, and then use the architect as part of the oversight of the construction (using someone who's arms length from the contractor.)

So which do you think would work best, letting the contractor front end the whole project, or having the architecture separate?

Everyone,

I was off the grid most of yesterday, so forgive me if I'm late in replying.   Lots of good information in here.  I appreciate all the help.

 I had thought about most of what you're saying.  I'd like to find someone to work with on this.  I'll have to take some time to find someone with experience who'd be willing to work with me.

 At the next NY meetup, I'll start talking to people there who are doing it.

 I think I want to have some idea what I'm doing before I start putting money out there :o)