All Forum Posts by: Paul Paquin

History:

In 2014 the building had a fire and since then the entire inside was renovated and is now like new. However, the outside was not repaired, and today you can see black all over the backside of the building (what appears to be mold). 

I put an offer on the building for 599K and they accepted but later that night my realtor called me and asked me to waive my right to negotiate a lower price after the building is inspected if the inspector finds problems with the roof and building. Again, the inside is like new and I've already had contractors inspect the inside finding no problems. The cap rate on the building is 7% and it's fully rented out, so that's all good.

Is this black all over the place and potentially the building needing a new roof within 3 years a deal-breaker? I've offered; if it needs a new roof and the cost of the roof is 40K I will pay half of that if they pay the other half, but they did not want to take me up on that offer and said the price of 599 already takes the potential of it needing a new roof in 3 years into consideration and that no matter what is found at inspection the 599 price is staying at 599, but my offer was not assuming it needed a new roof (I found that out after my offer).

More of an update: 

See the corner columns, towards the top on the left side of the building there was a hole in the building that they apparently forgot to fix when they did the roof maintenance. I still have to get the official inspection on the property, but I had a few of my licensed contractors come analysis the property yesterday and they said everything on the inside is in perfect condition, as it's all-new but there are some issues on the outside and the roof. This building has a 7% cap rate but 3 out of 4 of the leases will be up in August 2020. My company, Golden Financial Services (a credit card debt relief agency) is adding a location in NY, so we can take one of the offices here if anyone chooses to move out, so that's not an issue and could actually work out in our favor. 

Why buy the building:

The point of buying this building is to get extra income and potentially get an office for Golden Financial. Right now it brings in about 40K of net income per year.  

Financing: 

On that note, I am also considering purchasing in full through Golden Financial or a separate real estate llc, rather than buying it through bank financing. I am leaning towards this because why pay a bank interest, upfront points, and fees, etc.. when we can finance it ourselves. As far as protecting it from lawsuits, you get insurance for that and could even set up a separate real estate llc to purchase it through, ensuring it's protected from lawsuits. 

Another reason to use a bank's financing is that the bank will ensure proper due diligence and verify the leases, but that's what a detailed inspection is for right? And as far as verifying the leases, my company is a financial services company so we should be able to handle that on our own and request the attorney at closing verifies the leases at that point.

I appreciate all your excellent tips and advice. thanks so much

update on the building: The inside is in good condition, pretty much everything is new and nice. But the roof is not new, maybe it only has about 3-45 years left, but they just did a bunch of maintenance on it a few months ago, preparing for the winter. Here is how the roof looks today.

Should I buy a commercial property in New Windsor NY? Here are the details:   

-3 tenants, of which 2 of the tenants occupy multiple offices. The kitchen remodeling store occupies units 101 and 102. Hair salon occupies unit 100. And a doctor occupies unit 200, 201, and 202. 

This info was provided by the bank:

address: 

1124 Route 94, New Windsor

Purchase Price- $599,000

INCOME

Gross Rents $88,664

Add: CAM Reimbursement $11,478

Total Gross Income $100,142

Less: Vacancy & Credit Loss @ 7% $7,010

Effective Gross Income $93,132

EXPENSES

Real Estate Taxes $18,500

Utilities $28,000

Total Expenses $46,502

Net Operating Income $46,630 $46,630 $46,630

Annual Debt Service $36,628 $28,176 $34,997

(See below)

Cash Flow Surplus $10,002 $18,454 $11,633

DSCR 1.27x 1.65x 1.33x

Annual Debt Service

Option 1

65% LTV / 35% Down ($213,850)

Loan: $397,150/ 15 Yrs / 4.57% / $3,052 P&I $36,628

Option 2

50% LTV / 50% Down ($305,500)

Loan: $305,500 / 15 Years / 4.57% / $2,348 P&I $28,176

Option 3

75% LTV / 25% Down ($152,750)

Loan: $458,250 / 10 Yr Term/ 20 YR Amort /

4.57% / $2,916.46 P&I $34,997

Alternatively, every year they have a delinquent property tax sale where the deeds get sold and you can get a poroperty for really cheap. I found a few offices that will be getting sold due to delinquent property taxes at this year's auction which is in about 60 days from today. Should I buy this office above, or wait and try to get a better deal at the delinquent property tax sale?

All great advice. thanks guys. 

I am an investor (and businessman) who recently found an excellent property to buy, fix up and sell. I brought the deal to my contractor friend (and family member) and asked if he wanted to go in 50/50. He's willing to invest 50% of everything and do the work to fix up the property (which could take 60 days of his time) so that we could sell it and profit around $100,000 to split. The other day he hinted to me "since I would be the one doing the work and investing 50%, shouldn't I get a higher percentage?" I mentioned in return, "but it's a deal I found and brought to you, and without me, you could not afford to do this. Keep in mind, my company could fund the entire deal and pay a contractor to do all the work without any financial help, but I am hoping to give this family member a chance to participate in this deal (that could result in more deals). I feel if I require him to put in 50% of the capital that will ensure his skin is in the game and I can count on him to get everything done fast. 

What's fair here?

I could offer: 

Since you are doing the work I'll fund 75% of the investment (less money out of your pocket) and we could then split the profit 50/50. 

Or, I could offer to reimburse him for his time based on a fair hourly rate that he charges for a renovation job of this size, so at the time we sell his hourly rate would be treated as an expense and get reimbursed to him right away.

You can purchase delinquent property tax liens in NJ, and in many other states for that matter. There is a two year redemption period in NJ (unless you buy a vacant property which has no redemption period) and several technicalities that you need to familiarize yourself with before purchasing one, but you can certainly find killer deals in this way.

I certainly miss waking up in the morning to my beautiful view (checking the surf report and waves) and trying to decide on whether or not I should go surfing. Well, I can only look forward and hope for another deal like this in the future. On that note, if anyone knows of another killer deal (oceanfront in CA, NY or NJ) – I'd be interested in possibly purchasing it. I just finished reading "The Book on Rental Property Investing" by BiggerPockets (which is what brought me to this website and is an amazing book). As a result, I'm also interested in rental property investing. If anyone knows of an apartment building for sale please also hit me up! 

At this point, personally, I am looking to buy properties, fix them up and rent them out. My company, Golden Financial Services , also just launched a real estate division to our company. In this department, we contact homeowners who have not been able to pay their property taxes and offer to buy their property in order to help them avoid getting a tax lien on it and eventually losing it to foreclosure.

Investment Info:

Single-family residence other investment.

Purchase price: $376,000

Cash invested: $94,000

Sale price: $620

This was an oceanfront condo that I purchased as a short sale. I lived here for about ten years and sold it when the price was right. I regret selling it, I should have kept it and continued renting it out for $4K-$5K per month, but I was offered a really good price so decided to sell. 

What made you interested in investing in this type of deal?

The location being ocean-front and in a booming area (Imperial Beach California).

How did you find this deal and how did you negotiate it?

I found the deal through a local Imperial Beach real estate agent.

How did you finance this deal?

Bank loan

How did you add value to the deal?

I did not add much of anything to it, besides just letting it appreciate over the years.

What was the outcome?

I almost doubled my money. Purchased for 376K and sold for over 600K.

Lessons learned? Challenges?

I should have kept it and rented the property out, continuing to collect rental income. I thought that at the time, home prices must be at a high and that they would drop soon, little did I know they would keep rising.

If I waited just one more year I could have sold this condo for $800K, as this is what the new owner sold it for a year later after purchasing it from me.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Nobody that I would recommend. The real estate agent I used went out of business.