All Forum Posts by: Rich Somers

So I am in the early stages of applying for my first commercial loan. I just got a 5 unit multi family under contract yesterday, and I want to make sure I take the best steps in order to give myself the best chance of getting approved. I currently have $75,000 cash to put down on a 75%LTV commercial loan with a purchase price of $385,000. I have a $105,000 HELOC available to me and I plan on tapping into some of it to help fund the rest of the down payment along with closing costs. I wanted to use the rest of the HELOC to fund the rehab project, and in a couple years I plan on refinancing cash out at the properties higher NOI. My question is this: Would it be better to just tell the lender up front that I plan on using the HELOC to help fund this deal, or pull the HELOC out as cash and let it sit in my bank account while I apply for the loan? Which way looks better for an underwriting team? Or does it not matter either way? I plan on asking the lender tomorrow but wanted to make sure I'm not missing something. Some other information: This will be a recourse loan, my credit is good, DTI ratio is about 13%, and I have an additional $200,000 sitting in a 401K account. Lender says I'm strong, however since this is my first investment property and I'm out of state, it could be a little tougher to get the approval.

Look forward to reading your responses, thanks guys! 

Thanks for the advice, the building is actually in Old Louisville. The building is not being efficiently managed, and current lease agreements all expire this summer. With a $70,000 rehab budget, I think I can conservatively double the NOI. Hopefully the repair costs don't get too expensive. One concern is this: No other owners in Old Louisville have modern, trendy, updated units so theres no proof of concept. However, one of my good friends and co workers here in San Diego went to UL and rented there for many years. He believes there is a market for these types of units there, especially for the graduated kids that are into their careers but still want to live in Old Louisville. I also made friends with some various groups of residents who currently rent there, I showed them pictures of what my rehabs will look like and asked them how much they would be willing to pay, I was actually very impressed so I think I'm going to go for it and deck these units out. What are your thoughts?

So I currently have a 5 unit Multi family under contract in Louisville, Ky with a 21 day inspection contingency period.  The building is over 100 years old, seems to have somewhat updated plumbing & electrical and seller claims roof was replaced in 2017.  My question is this:  In addition to just the typical home inspection & pest inspection, would it be wise to have a HVAC specialist, plumber, electrician, and roofer come out to dig a little bit more thoroughly into this property?   I plan on flying out there to be present during this inspection, and also intend to have a couple contractors out to the property to give me itemized estimates for the rehab that I intend to do.  To give you guys a better idea of the rehab:  I plan on doing mostly cosmetic items (new cabinets, counter tops, shower, vanity, flooring, appliances, ect.), along with cleaning out the basement to add coin op laundry, additional storage spaces, ect.  

Thanks guys, I look forward to hearing your responses! 

Awesome, thanks for all the great advice guys!  I was able to get this building into contract today after 3 days of back and forth negotiations.  It seems that about half of the neighborhood have owners that include utilities and the other half that either use RUBS or have lease agreements where tenants agree to pay a set monthly utility fee to owner in addition to their rent payment.  I'll have to get with my attorney out there and see what kind of lease agreements we can get typed up for this.  I love the idea of secret shopping some of the near by buildings, I will do that next time I'm out there!  

I just got a 5 unit multi family under contract today.  I was wondering if anyone knew any awesome local commercial lenders in Louisville.  It looks like I'm likely going to go with Republic Bank, however it doesn't hurt to shop a couple more lenders just to make sure I'm making the right decision.  Any suggestions would be much appreciated!  

So I'm currently in negotiations for my first multi family property (5 units & up). I wrote an offer yesterday, and today the seller countered. Before I counter the seller, I am trying to more accurately nail down my pro-forma numbers. Right now the owner pays the majority of the tenants' utilities (gas & electric/water & sewer). When the current tenants' lease agreements expire I plan on implementing RUBS to push those utility costs on to the tenants. Currently tenants go off site to do their laundry, I plan on cleaning out the basement and adding coin operated laundry and installing storage cages for the tenants to rent if needed. I also plan on installing key phob entry for the lobby, and some security cameras in the common areas to better secure the property and help the tenants feel safe. I also plan on swapping out all the units older appliances for brand new appliances when I take over the property. All of the lease agreements expire within 60 days of our scheduled close date so with these minor upgrades and savings it looks like I can conservatively increase the NOI by 30-35%. Have any of you guys implemented RUBS when you took over a property, and if so could you tell me about your experience using it? Also, has anyone used any of these other techniques mentioned above personally and if so any feedback would be awesome! Thanks guys!

I will be flying out to Louisville this Saturday March 2nd and flying home Monday morning March 4th.  I will be networking, setting up my team, checking out the different neighborhoods, the night life, and the overall lay of the land since I've never been!  I've identified Louisville as a market in which I want to invest in 6-12 unit multi family apartments for many reasons.  Anyways I'll be staying at the Hyatt Regency downtown, if anyone wants to link up during my stay shoot me a message!  

You should also consider a house hack as your first deal. Buy a 5 bed room house with FHA financing (3.5% down), rent out 4 of the rooms, and likely make enough rent to cover your mortgage, utilities, and then some. You'll be living there for free, you'll be gaining wealth by pay down of your principle, income tax savings, & long term appreciation. Then take what ever cash you have left over, continue to save, and look for your BRRRR. When your young its easy to house hack and have roommates, so I would suggest taking advantage of it while you can...once your in your 30's, your not going to want to.