All Forum Posts by: Rob Bird

To any investors in Maryland that underwrite your own deals: how are you modeling property tax in your pro forma?  Given that assessments are every three years, it needs to be able to account for where you are within that three year period when you buy, and then step it up by 1/3 each year of the assessment. An additional complication is that I assume you have to project future assessed value if your hold is over three years, or if you happen to buy later in a three year assessment cycle. This is really an Excel question more than anything!  It seems like it gets pretty complicated pretty quickly, unless you just have some sort of simple approximation that you project instead.  

The building I'm looking at is 6 units, though I'm not necessarily limiting discussion to deals that small.  By "lax" I mean not meticulous record keeping.  And by "no", I mean none.  :)  In this instance there is no mortgage balance and I have not gotten to the point of asking for any documentation.  I'm still trying to do preliminary underwriting.  This building is all month-to-month at the moment but I didn't mean to limit discussion to the specifics of this building, per se.

Regarding your mention of tax returns, are you saying that the lender is going to want to see the seller's tax returns?

In the case of smaller properties that have lax or no financials, what approach to lenders take to underwriting/valuation?  Are some types of lenders better for these than others? My gut feeling is that community banks and credit unions might be the ticket for this type of thing.  

Of course I expect sellers and their agent to try to get top dollar.  That is no surprise.  I'm simply wondering how much bargaining power I have.  I know that I have my own metrics for what works for me and if it doesn't work, then it doesn't work.  However, it always helps when one knows the strength of their own position before proceeding into an offer.  My inclination was that it's somewhat bogus to expect a buyer to pay as if the building is already performing at a certain level, but for all I know, in instances such as this one, maybe it's not that far-fetched.

Hi all..question about valuation.  In a smaller property with high economic vacancy, is it reasonable for a seller to use market rents to value the property?  Specifically, if the property could be rented today, without any renovations, at a higher rate but the seller up til now has chosen not to, should they expect to be able to base the sale price on gross potential rents?

A great and pretty easy read on the subject is this year's "The Lords of Easy Money".  It goes into how Bernanke's quantatative easing caused massive asset price inflation and that that is what the Fed is now targeting, not just the CPI.