All Forum Posts by: Phil B.

Thanks for connecting me with Joel. As an update to this, I just completed a successful 1031 exchange into a Walgreens that Joel found in a phenomenal location.  The dark value of the property is greater than my loan balance. I plan on utilizing joel for another 1031 exchange in the near future. 

I am under contract on a NNN property Joel Owens found for me, and Kevin Sellers lined up my financing. I am set to close the end of this month. I too have 2M, mixture of 1031x and additional cash. Purchase price is just over 5M, we will be getting a 5.5% CoC from a stable asset in a great sun belt location. This makes more sense for me because it is passive compared to how active my multifamily property was, even with a property manager. The barrier of entry is high for quality STNL's but it protects my downside and fits my investment strategy of stable predictable cashflow.

Once this deal is closed, I plan on executing a second 1031x with another multifamily property I own. Both Kevin Sellers and Joel have been extremely helpful throughout the entire process and I plan on working with them again. 

@Hai Loc thanks for the reply.

Yes I agree. I was curious to know how successful NNN investors navigate this issue? These deals seem to move fast. I know people throw 1031 money into them, but like you said, what do you do with it once it goes dark?

I own a few multifamily rentals and have been exploring single tenant NNN opportunities. Does anyone who buys these look at the long term conversion or development of the property in the event the tenant doesn't renew after the lease term?

That seems to be the biggest downside. I have looked at a few dollar general deals in the 1-2MM range with 10 years left on the lease term. It would be a very expensive piece of real estate to own if you couldn’t re-lease or develop.

@David Lilley we are drafting an operating agreement as well. It would include operational decision power, the seller not being able to sell his share to a third party, etc.

We intend to split profits 50/50 while we wait for approvals to redevelop. The seller is also doing the construction for the redevelopment.

@David Lilley thanks for the response.

Our purchase/sale contract would include our buyout agreement once construction is complete. All of the terms relating to construction, lease up and subsequent refinance will be clearly stated.

"If you and your partner both have your roles and responsibilities clearly defined in the operating agreement of your LLC, it may be a good idea to invest as that LLC."

What do you mean by that? Which LLC, a newly formed one? If I'm understanding you, us forming a new LLC to partner with the current owners existing LLC would be cumbersome.

If we became members of the existing LLC with the current owner, I guess the property would not be able to fall under our holding company during this hold period until we refinanced?

Myself and my partner currently own a multifamily property. We own the building in an LLC that we are equal partners on. We formed a second LLC in WY as our holding company for future deals.

We are buying a 50% interest in another multifamily. The current owner owns the property 100% in his own LLC, "Main st LLC." My partner and I are doing a value add, then buying out that owner upon refinance so we will own 100% of the property.

My question is, do me and my partner form our own LLC to partner with "Main st LLC", that way our entity can be owned by the holding company? I believe the alternative would be purchasing shares in Main st LLC and all three of us would be in one entity. I would like our portion under our holding company in WY, I just want to make sure that's the correct way.

Thanks.

(I used corporate direct to form the WY company, it’s difficult to get ahold of someone to answer questions quickly).

@Peter Nikic

Thanks for the response, this property is located in schuylkill county, PA. During my due diligence period, I asked the inspector to look out for any leaks, or any other reason why the water and sewer are so high. Turns out there are no leaks or anything he could see as to why the water was so high. I’m exploring low flow filters for sinks and showers to lower this expense.

I agree 10% is high for vacancy. This property has a waiting list for low income seniors. I underwrite conservatively you give myself a realistic snapshot of what a not-so-great year might look like.

HUD made me use a management company that was approved through them, they charge 8%. Stings, but doesn't kill the deal luckily. I should be closing this deal within the next week or so.

Thanks again

@Spencer Gray

Thanks for the response. Yes, I’m looking to lower water/sewer expenses through low flow options.

I have not explored those financing options, the 5% rate with the 7 year arm was actually the best of 3 other banks.

This is an independent senior housing complex, with a 20 year HAP in place. Annual rent increases are 1.4%

Does anyone own properties where the CoC is lower than the cap rate? Numbers below. Thanks

Fully occupied 24 units

Gross rental income $213,613

Tax $25k

Insurance $6,252

Water $12k

Sewer $17k

Comm. bldg & common area Gas/electric $13,500

Landscape/snow removal $5k

Property management (8%) $17,089

Trash removal $2,200

Vacancy (10%) $16,800

Repairs ($800/unit) $19,200

___________________________

Total expenses $134,041

NOI $79,572

Purchase price 1,150,000

25% down Debt 5% 25yr am 7 year ARM $60,504

Cash flow $19,068

Cash to close $300k

CoC 6.3%

Cap rate 6.9%