All Forum Posts by: Rob B.

Has anyone looked into using a business to buy a commercial property? SBA financing is a lot better than traditional financing. In some circumstances, you could but a business with a track record and then use it to buy a commercial property for only 10% down. Once you own the property, you can sell the business and keep the property with a great tenant set up. 

Has anyone looked into this? 

What type of property and where in CA?

I'm just curious, does anyone have experience with Residential Care Homes? I saw one advertised that was a house set up for six people, fully occupied. They claimed it was 10.5% CAP. I'm just wondering, is this akin to a nursing home or is it just a house set up for the elderly. Does anyone know how these work and if they're a good passive investment?

I guess I would ask for a little more information. 

How far away from you is it? Is it someplace you could get to every weekend? 

What is the current market rent in the area? No matter how much you fix it up, it's unlikely to exceed the market average. 

A 90+ unit could definitely be it's own little community, but it would still be affected by the neighborhood. What's the unit mix? I try to avoid a lot of 1/1s because they don't attract stable tenants. 

I would also try to find out how it got as bad as it is. I assume that the other guy is as smart as I am and if I could think of something to try, he would have also. 

I'd love to hear more though; it sounds really interesting. 

@Claude Robinson III I live in the Bay Area but I don't invest here other than my primary residence. I have an office in Fremont if you ever want to meetup. 

I have properties in the Antelope Valley and an apartment complex in Fresno. 

I spoke to a community bank who said that they would offer 10 year fixed, 30 year amortized, at 2.5-3.0%. Loan size was $1.1M at 70% LTV.

You should also give your tenant notice via registered mail as soon as possible. Here in CA, if they've live there for over a year, they're entitled to 60 day notice. That can potentially slow down the sale and if you need to sell before the 3 year mark, which you really should, the extra month could make a difference.

I would consider refinancing or selling it, depending on circumstances. But leverage is key in investing. I actually had the same circumstances 18 months ago. I could either have bought a primary residence all cash or bough 4 investment properties. I chose to buy the investment properties, but in hindsight, I would have done it a little differently. I would have bought my primary residence and used whatever was left for investment properties. 

The interest rates and down payment requirements are a lot less on a primary residence. Also, if you live in it for two of the last five years before sale, you can write off $250,000 in capital gains, $500,000 if you're married. So you can buy a house, live in it for two years, rent it for 2 1/2 years and then sell it. So you can have a rotation of three primary residences in addition to your investment portfolio. 

The more that you leverage, the more appreciation that you will see. I have a strong investment portfolio, but we're still buying more primary residences to take advantage of it. 

I've been investing in SFRs for the past three years, but I'm trading up to start investing in small apartment complexes. We're about to close on a 16 unit apartment complex with assumable financing, which is fully amortized with another 23 years to go. 

I know that most MF loans are balloon payments after five years or something similar; my question is: is it common to refinance the loan or to get another loan when the balloon payment is due, or is it not worth it? What I love about real estate is that I can hold it for 10-20 years and I'll have a steady, exponential stream. Switching to Commercial Real Estate, I'm worried that those balloon payments might come due when the market is down or when I can't sell. 

I disagree that buying your primary residence is a bad investment. Especially if you are willing to buy a 4-plex and rent out the other units. The rate and down payment requirements are incredible, plus you will have an easier time qualifying. My wife and I move every year or so and keep picking up new rentals that way. I won't lie and say it's not a pain in the butt; but it's our retirement plan in action. 

Leverage is really key. Why not buy a 4-plex with an FHA loan at 3.5% down and then invest the remaining money into investment properties. Just remember your DTI, we had a ton of cash but we still couldn't purchase any more residential properties because of the number of mortgages we have (all cash positive), so we started into commercial as well. Now I'm getting ready to sell two investment properties so our DTI will be low enough to purchase another 4-plex here in the Bay Area.

Don't forget about the capital gains write off for an owner occupied property. If you live in it for 24 of the 60 months before you sold it, you can write off up to $250,000 in capital gains; $500,000 if you're married.