All Forum Posts by: Sarah Present

@Michael Woods do you lend outside of New York for investment properties?  Colorado? 

@Bill Couture thank you for your response!  I meant to put an update on this post actually on the 504.  It turns out 504 definitely was an option, and just as you described.  It falls under a "hotel" loan style within 504.  What bit me hard was that banks right now are crazy resistant with COVID19.  I mean, i could write a book about this experience, there was so much that has happened in the 5 months we tried to do these cabins.  What was probably the worst, was that the owners kept terrible records.  I mean awful, which was apparently very common in this mountain town with older owners.  Its fine till you try to sell it.  But the lenders were by far the most difficult.  It has been a crushing experience, as the lenders did not give us adequate guidelines or Time lines from the start.  Without going into massive detail, we extended deadlines once and then needed to again, but by then they had found a back up offer.  They did not sign the amendment to continue with us, and took the other offer.  We were able to see the offer which, helped for closure after all of the heartache.  It was obviously someone who could put more money down up front, and take a smaller loan.  Although what i've heard through the grapevine they are still having a difficult time.  Will be interested to see if they close on those cabins.  For me it got too emotional, it was a dream come true to run those cottages.  What I will walk away with - is a massive learning experience.  We put together a killer business plan and did research beyond what one could think possible.  I learned so much about the 504 and 7a loan structure and all that was possible for us.  The bottom line is I don't know that we ever would have made it through underwriting.  The banks (and we dealt with several) - changed the rules by the week.  They asked for proof of x,y, and z - we would work so hard, give them what they need, and then they would decide that it needed to be different or more.  We would say - ok - this is what you are asking for, they would say yes, and then when we provided it -  nope, just kidding, i want this instead.  It seemed as if they could not ever convince their executive management in this pandemic environment. Then we attempted to buy a plot of land to build on - lenders would not touch it unless we built a primary residence - no rentals.  Since then we  have been trying to do a construction loan to renovate our existing air bnb rental - and lenders won't do that either.  They are saying if you rent it at all, even one day, its considered an investment and they won't do it.  And that is with a house we already own!  Its very deflating, to have money and want to cease an opportunity but lenders will do nothing unless it is your primary residence or second home that you do not rent out.  They only way to do it is if you have ALL cash in the bank?  We simply aren't there yet.  I went off on a rant there because its been frustrating to hit wall after wall lol.  I'm still looking on our renovation and hope to find a construction loan solution to make it happen this fall - we have a general contractor lined up, design plan set and now our lenders have dropped out.  Its a crazy time.  Thanks everyone for your thoughts on this, it was bittersweet in the fact that we gained so much experience and knowledge in the process, but that someone took it from under us.  I hope to tell a success story in its place someday! 

I'm trying to learn the private financing world due to a bump in the road on SBA loans right now. This aspect of investing is very new to me. This project entails 12 cabins in a mountain town that has a really nice tourist flow and offers a lot of outdoor activities.  The cabins are currently booked solid despite the Covid19 situation.  We had a 504 SBA loan in place and are under contract for the property, but after working with the lender for 2 1/2 months they all of a sudden slapped us with an email that they cannot approve any hospitality related loans.  Its a tough market right now, and understandably so, but we have a very solid business plan, and the existing business has been operating for 21 years successfully.  They are busier this summer than last summer.  We have data showing everything. We feel very good about this business.  We are having two other lenders review now but I have started to lose faith that despite my tireless efforts to show the obvious growth and potential we can bring with our business plan and endless data - these lenders may end up with the same result.

The sellers continue to urge us to find private financing.  I have not explored that in the past.  My current interpretation is that private financing is ultimately always hard lenders - is that a safe statement?  This deal was great because SBA literally was doing like a 3.5% interest, it was crazy good.  But its not even feasible to think about 6%-higher for any length of time.  And is also safe to say that people only use private financing when its super short term? (6 months or less?)?  We would have no guarantee in the short term with the way lenders are behaving.  

Ultimately, if we could find a financing alternative that was 5% for a good two years - we would be golden.  We could easily double the current owners revenues (they are super old school and ready to retire).  Is there such a thing?  Its overwhelming trying to learn about private financing because it seems you run into a lot of hard money lenders that charge very high interest which i assume would be a no brainer for a fix n flip, but not for this project.  

This is not just an emotionless investment, this is a passion project for sure, and the location is very good.  I am really trying to think outside the box here and the sellers seem irritated and impatient (they don't seem to understand the Covid19 effects, and blame everything on the SBA).  We've conveyed over and over, that the SBA is the only thing that has allowed lenders to even consider this at this time and they are not the problem.  Anyway, I digress, this is a passion project and something I would stay closely involved with.  I hope to move to the area when i'm lucky enough to retire from my day job and really feel strongly about this project.

I'm looking into angel investors too - however the networks i've looked at, show me there are a significant amount of terms i'd have to consider. And this leads to mounds of additional question like - would we need to somehow change our Articles of Org of our LLC if an angel investor were to be interested and receive revenue? If anyone has expertise in these areas (private financing, angel investing) as it relates to this situation I would be very interested in hearing from you. I'm considering even setting up a pitch for angel investor for just the down payment and operating costs - but again setting that up is something i've never been involved with and havent found any reliable resources that dig into these things.

Any suggestions?  Also the appraisal came in a little lower than the asking/offer price, and we are now definitely going to have to push out the closing date again, so its imperative that I find something that will work in order to get the sellers to sign with us again on a new contract which will be soon.

Just trying to keep a dream alive!  :)

Sarah

@Paul Sandhu that is really interesting!  @Tyler Hallman what a great idea, its about being creative and you are right, that is not a bad idea for colorado, thank you! @John Underwood thank you!!  @Nathan Gesnerthanks!  It makes sense to lock it in as a serious buyer   @Michael Baum thanks for the info!  We have looked at areas around twin lakes and lake granby and a few others...but the cost is high.  I'm still hopeful though! :)

@Michael O'Brien Yes!  We love the thought of that concept very much - my comment above to @Michael Baum shows some of my need to learn on the land - how to know what to evaluate to strategize for such plans.  However, its also hard to get the land close on the lake or even a river - which is my goal.  That said, its always still a very good plan.  I think i need to revamp a network for knowledgeable people in that arena of how to buy land, because it would be a lot of fun.  I would also need someone to scout out the land before someone else gets it - because i'm never first in line, haha

@Michael Baum thanks! Yes - I am in that boat! And actually, now that I am reading closer on the 504, I would need to occupy 51% of the real estate, which would not be the case on any of these purchases...so... not sure if that excludes me - I wouldn't be renting it to another business, I would be using it as my own to rent out for my business... - so I THINK i still would qualify... We formed an LLC to use towards our additional properties, we own 1 that is in our personal names, but do not want to proceed with anything additional without the LLC.

I believe this last one was a screaming deal.  Any property on the lake at all, was running for $2-6 million, no joke, just to be on the lake. Whereas, this was 12 separate units.. for 1.5 million, just steps from the beach/lake use and town and everything. The fact that they were killing it on top of the search list for places to stay, made it sting that much more that I didn't act more quickly. I am not only suspicious... i am nearly certain that in 15 years it would easily be worth double the value the way things have gone in those areas. 

It was listed - and that is all i have at the moment to find such opportunities.  I do not yet have a network to get the grapefine effect - which would be great, but I'm not quite there yet.  Yes, I know what you mean on foundations.  If you go as high up as leadville (almost the highest town in colorado) the houses are from 1890's and they are built on a slab!  They are all slanted when you walk through them - its fascinating haha.  On the last few opportunities, i hadn't confirmed foundations - so not sure, but i think they were better than the Leadville situation.  

There are some much more affordable options, for say, a house but with extra land to build on - which could lead to some fun and high potential opportunity - but it gets into a lot of things I do not have expertise on, which is how to evaluate land to build on - permits, zoning, set up for plumbing, electrical - that is not in my wheel house at the moment, but i wish it was!

I missed out on a few opportunities and I am looking to refine my strategy for future, as the specifics don't align perfectly for this scenario very often.  We look for multiple (think cabins cottages) properties to rent out for vacation rentals.  The ideal is, near or on a lake, in mountain town (we are in colorado) and can be rented together for family reunions, events. Or separately.  The location does well and is basically a given that with rocky mountain national park nearby and a lot of other outdoor activities - everything rents out all summer and a few months on each end, no problem.  So when i've seen something remotely feasible financially - someone else usually gets it first.  

The questions I want to answer for future reference - do you offer before you see it?  I know that its done that way for a lot of investor properties but with a group of buildings and a high down payment / total price, it seems riskier.  However, ultimately you have the same "outs"...    

The last one I believe I should have done this, as the buildings were dated back to the 1930's and such, however they were all currently renting and had a lot of great return.  So they weren't being sold because of excessive neglect, the owners were ready to retire and had kept them up functionally, just maybe not aesthetically.  

The other question reverts to financing.  I can't make necessarily a quick offer - i am not a cash buyer, I would be going through a 504 small business loan - which I have not done before.  I am reading through to get my ducks in a row on this but does anyone have experience with these on buying a commercial/residential property like this?  Would love any and all feedback on these concepts. 

thanks so much

Hi Jeff - how did it work out? Did you purchase the cabins? :)

Sarah

@Daniel Holbrook we are looking in Cheyenne now as we have heard as well the appreciation is excellent. Are there property management companies you would recommend?  We would need to use one as we are a couple hours away.

Thank you all so much!! Great advice and will serve me well when i prepare to sell!