All Forum Posts by: Moshe H.

Thanks @Tom Keith. I decided I am definitely going to give her a heads up and even offer to pay her if she wants to help me out and give me some advice about the property since she knows the area well. I can't afford the full commission so if she only wants to work that way, no hard feelings.

@Russell Brazil, @Wade Sikkink, thanks for your input. There is no formal agreement and she's not bringing me deals in my range at the moment. I think following Wade's advice will help mitigate the risk that I will be blacklisted. I think she knows I'm not a shady operator. I even sent her a box of chocolates after the one listing we saw together in appreciation for her taking the time, even though she had to go to the property anyway to take pics for the listing - but she chatted with me and gave me advice. And I didn't go through with that deal.

 That's funny. In Pittsburgh they exist and they call them Pittsburgh toilets. But the one in my parents in laws' old house did have a stall built around it, and in the newer house a bathroom.

If I have begun working with a commercial broker in a certain area and we have an informal agreement that I am working exclusively with her (we haven't looked at dozens of deals together or anything, but we've talked about two or three), and then I find a FSBO deal in that area and contact the owner directly and start negotiating, should I let the broker know as a courtesy or even a moral obligation? I know the owner doesn't want to pay a broker's fee and I know I can't cough up 6% or even 3%, so I'd feel more comfortable just not saying anything...

I made this extremely professional graphic to show where to click to vote on a post:

This is the only format I'm familiar with since I have been around here less than a year.

@Tom Keith, beautifully put. Thank you. Someone also advised me via PM they thought this was definitely not legal. So I have moved on! :)

Thanks @Herman Stevens. Quick tip: when you want to make sure someone on a thread sees your response, tag them with the @ symbol. I checked back because I saw you upvoted my response (thanks!) but if you hadn't I wouldn't have necessarily known to look back at this thread unless you tagged me.

I can only tell you my limited experience, which is that the vast majority of commercial lenders want 75% loan to value and 25% down payment so the investor has "skin in the game". Something tells me with only 4% in the game they will be wary. And it's something you want to clarify with a potential lender early on. Just yesterday I spoke with a local community bank that will do 20% on a commercial loan, so maybe you'd have better luck with a community bank, but he would not allow a seller carry back note (yes, I asked).

(Edit: you probably know this already, but anything up to 4 units is considered residential, can be loaned at 80% LTV on a 30 year amortization and will be sold to Fannie Mae or Freddie Mac. 5+ units is commercial, cannot be sold to FM&FM, and therefore has different guidelines. You're also going to look at probably a 20 year amortization and an ARM or a balloon payment.)

Be very cautious with a rural area that may be in decline. Your property will never appreciate, and when calculating your total rate of return on the property you'll have to take into account all capital expenditures you'll be making over the hold period, as well as SELLING COSTS (can be up to 8% or more) and the fact that in 5 or 10 years when you want to liquidate it, it might very well not be worth a penny more than it is today. If you take all that into account and you're still happy with the return on cash invested, then you can proceed with more due diligence.

Disclaimer: Don't take my word for anything. I'm no expert or guru, just someone that has read a lot, listened to a lot of podcasts, and talked with some sellers, brokers and lenders in the last 6 months.

Hi @Herman Stevens and welcome to BP. One thought - what bank is going to allow a seller carry in the second position for 21% with the purchaser only having 4% into it? Especially for a new investor like you or me.

Cap rate is probably exaggerated. Plugging in the GRM and cap rate into the formula yields claimed yearly expenses of $23027. "Management in place" - that's gotta be at least 8%, so now we're down to $17k expenses. Taxes are $2238.60. CapEx and Maintenance - AT LEAST 5% or $3,763.87.

That brings us down to $11,000 in mystery expenses, or $76.33 per unit per month. Now, do tenants pay ALL their own utilities? If not, is what you are going to pay more or less than the above amount?

Actually, I forgot vacancy. They claim 3% vacancy so that's another $15.68/unit/mo. 

I would suspect if you get your hands on the actual numbers they will tell a different story than the listing. If the cap rate is 10% or less (or whatever it is, really) you have to know if that makes sense for that area. The building is 75 years old so you have to know if there is any major deferred maintenance.

Last but not least, it is advertised as 12 units and LoopNet's property data says it's six units, so you need to make sure they have not been split in half without proper zoning and permits.

Guess that's it for my ruminations!

@Thomas S., it may be a personal lifestyle decision but that's precisely why the government gives a tax incentive. The authors of the tax code wanted to encourage home ownership, which is supposed to embody "the American Dream". Perhaps that is changing now. It's the same reason married couples get a tax break. Uncle Sam wants you to get married. (Well, not you, you're Canadian anyway :-P )

@Frank Gucciardo - did you say something about Newburgh? LOL. Thanks for the tip. You mentioned rent ready - sounds like @Charlene Isoh wants to purchase for $25k, rehab for $20k, and then rent. So she would be in it for $45k. 

What do you think of Poughkeepsie? I seem to have heard there are bad areas but also not-so-bad areas.