All Forum Posts by: Owen Hogarth

I sure do, check your requests.

Owen

I agree, I was thinking it over before I posted it here to make sure that I wasn't crazy. I think I can let this one pass.

i

Thanks for all the questions and responses; I cannot figure it out. It's ok it's not something that I want to take on right now.

I know in a typical deal that I "would" do, after about 12 months of property seasoning at at market rates, I would refinance and cash him out before the 25th month.

This property doesn't have much upside for me. I just found it strange when the seller made the offer and I had a chance to look under the hood.

No balloons, I've checked. What I think is he's hoping that I get in there and get my hands dirty, fails and he can keep my down payment some extra payments but even that doesn't add up because he would need to pay out of pocket.

$30,000 / 24 = $1250 per month
Plus
$2,000 from me per month
$3,250 total per month

he's short $1,750 that he's making now.

45 unit mobile home park in the south east.

seller owes 345,000 @ 7% with a bank.
debt service $2,200 + taxes, insurance, and other management costs;
that eats up his $5,000 per month.

He has the property for sale at $300,000. 10% down and monthly payments of $2,000 for 24 months.

The property owns quite a few of the lots but discounted rents for the renters to maintain the property there are also some vacant lots on the property. It's not connected to the city sewers and there's really high electrical bills for lights around the property.

My question; what's the deal?

A seller offered owner financing on his mobile park, great rates and terms but come to find out his loan balance is more than he's selling for.

When I found out the loan balance, the property barely cash flows as is so; I don't get what he's trying to do?

Threw me for a loop and my head is still spinning, maybe because i'm a nubee :)
Any advice?

I will work with the private investors individually about the dollar amount. These are commercial properties so the minimum loan amount is $30,000. No maximum.

1 investor per property in first position.

Mitch all my deals are not in California but if you lend there I can refer my California deals to you. I pay monthly interest payments.

I am looking for private investors to fund some of my commercial deals. These are currently cash flowing properties being bough at 55-75% as-is value with major upside after stabilization.

You will be in first position.
10-18% Interest paid monthly, quarterly, yearly
points are negotiable
at least 12 months.

You will see realtors advertising 8% cap rate based on proforma numbers, you have to ask what are the current numbers. Get them to give you previous year Profits and Loss statement (P&L)

Like most everyone has already said, incomes will be buffed up and expenses will be toned down; also keep an eye out for deferred maintenance.

Most markets will have at least 5% vacany better to calculate with 10% 12-15% to be conservative and management fees are usually 5-9% of your gross yearly income.

One last thing about commercial properties; if you buy and are not certified to be a manager; pay the management company what they're worth.

This was one of my deals.
Seller from California bought a nice cash flowing property in the Mid West. They were charging about $4,000 per unit per year for management fees maint. replacement reserves etc. She was netting $50k per year.
She wanted to save that money so she got rid of the management company to save the money and do it herself; from California.
Needless to say the place got trashed; I came in and she did a great job renovating the place after the mess she caused. The property was now netting 2k per month she wanted a little over $375k.
I bought the property with private money for $100k at 10% interest only 24 month term. Giving myself 4-6 months to get the property in good shape, the cash flow value at 9% will be more than $600k. Cash out refinance, pay off my investor put some cash in my pocket and on to the next one. Great deal for me, my investor but a bad deal for her.

Don't be penny wise and pound foolish.