All Forum Posts by: Peter Giardini

Rich... this is great insight...

So those new to this game what Rich is saying is that of the expenses to operate this building in the first year... not including the cost to perform deferred, required maintenance will be $34,560.00 and the NOI will be $23,000.00. Which doesn't do much for the value of the property.

Anthony, you have got your work cut out for you. What can all of us who jumped in do to help?

Pete

Once again... more great insight.

The first question I would want to know is... what is the value of the property, obviously based on its income value (NOI divided by Cap Rate).

Once I know that... it is fairly easily to determine how much debt the property can support.

After that it is just a matter of finding the right combination of lenders to fund the deal based on their lending criteria.

One approach that I have taught to countless individuals is... assuming the property value is present is as follows"

Puchase the property with hard or private lender funds. Then, assuming you have created a working relationship with a local bank, go to that bank and request a "recapitalization" loan that contains a construction component... and if the value will support... ask for a '"stablization" kicker (that would be a cashout) in the back end.

What this does for you is allows you to get into the property for next to nothing... out of your pocket, and then put new funding in place that retires the purchase loan.

Presto... 20% or 25% down payment requirements and a potential cashout at the back end.

Pete

Rick,

At the risk of highjacking Anthony's thread and to the benefit of the newbies...

What do you believe the NOI would be?

I think it will be around 52% of income as I see high vacancies and turnover expenses... and unless the property manager is really good (and we know how that goes) I believe that maintenance will be a constant issue.

Thoughts...

Pete

One other thing you want to add to the bottom of your letter which actually works are words to the effect...

"Please keep this letter with your important papers in case your circumstance change in the future"

I was always skeptical about this statement until I got a call at 9PM one night from someone who had kept a letter that was sent to them 18 months prior. By 1AM the house under contract and assigned for $10K within 48 hours after that.

Man... I love this busines...

Pete

I addition to the great input provided, one practice that that I put in place that yielded great dividends (rent getting paid) was as soon at the rent was late I would schedule a "safe and clean" inspection so that I had a reason to get into the property and remind the tenant(s) that I was not going away.

Regardless of the outcome of the inspection, I always found a reason to have to come back for a "reinspection" in a week.

My philosophy has always been that once a tenant got onto my radar screen I wanted to take as many actions as I legally could to keep them "off balance".

The "pay or quit", eviction notice or eviction filing, the inspections, once a week (or more) phone calls... all were intended to let the tenant know that they were under the microscope and would remain so until their rent was either paid or they were gone.

In at least 60% of the cases the rent was caught up. In about 90% of the cases, when a tenant was evicted there was very little damage, because we were in the property a lot prior to the eviction... and of course in some cases we never got the rent and ended up with a trashed property.

Didn't happen often though.

Pete

Anthony,

This is what the creative side of this business is all about.

Yes... you have your work cut out for you, and yes there are pitfalls along the way... but you go the owner to share in some of these risks.

Your job is to build the equity through upside management and then enjoy.

One question... when do you have to take the seller out of the deal and under what terms?

Keep us posted.

Pete

Jon,

Good luck...

If I can offer any insight into the approach just let me know.

Pete

Richard,

Interesting approach. I get it at the conceptual level... but could you share a bit more regarding the process.

For Lon... the best way to find these local portfolio lenders is to call around to any bank that has the name Savings and Loan or Community Bank in their name.

These banks usually retain their real estate loans within their own portfolios... hence the name "portfolio lenders".

You want to speak with their commercial loan officers... as the residential people won't know what to do to you.

I have a report that I put together some time ago giving some detailed steps on how to approach these lenders... if you would be interested in it... just PM me.

Pete

Owen,

Yes... it does look like we are in for some exciting times.

In my market, Baltimore, we are seeing at least one slam dunk residential deal every quarter.

By slam dunk I am talking about a deal that most regular investors can get into without a ton of cash on the down payment side and lots of upside potential.

Lets hope that the opportunities everyone is sensing come to pass.

Pete

Jon,

I am having a difficult time understanding why you are have the challenges that you are?

Are you trying to get this refi done using conventional/residential financing?

In my experience in Baltimore a no seasoning 70% to 75% cash out refi takes about 2 months and there are at least 8 lender who will do this.

At the risk of sounding like a broken record, I believe that every investor needs to find out who these lenders are and create strong relationships with several of them.

I hope I don't sound like a broken record or that I am being overly challenging?

Pete