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All Forum Posts by: Frank Gucciardo

Frank Gucciardo has started 9 posts and replied 158 times.

Originally posted by @Jonathan Twombly:
Originally posted by @Account Closed:

One last comment, I swear! 

A lot of people are moving up to Hudson Valley. Think Beacon, Saugerties, Wappingers Falls, Rhinebeck, Kingston, etc. Newburgh has this underground group of people that are trying to revive it by buying the needy homes and restoring them. There is desperate need for space and green and people are willing to go about 2 hours up to get it.

 I'm really rooting for Newburgh.  I looked at a bunch of properties there in 2010, and it was really rough.  We decided not to move forward.  I have not been back there since, though, so I wonder how it has changed.  Lots of really lovely buildings with a lot of potential, and there is even a park designed by Frederick Law Olmstead (who designed Central Park, etc.) right in the middle of the city.  But it's also on the "wrong" side of the Hudson River in the sense that there is no train service to Manhattan, making it a bit of a pain to commute into the City.  The schools are also terrible.

We fantasized about the idea of trying to buy an entire city block and then giving away free or very cheap rent to artists and other people who would change the character of the neighborhood, but this would be hard to pull off and it would be a long time before we saw any profit from it.  But perhaps someone will still do it.  Perhaps you could start with one of the better blocks near Washington's Headquarters or the college that's there and try to change things, block by block.

 Unfortunately the only thing that has gone up for Newburgh in the last year is the murder rate.  I see no light at the end of the tunnel for that city.  It's unfortunate since I'm from there (Town of Newburgh) and I'd love to see it thrive and regain it's former glory.  Decades of poor management, terrible elected officials, and a majority of the populace that just doesn't care are proving impossible to change.

Post: Commercial/Apartments Deal Analysis

Frank GucciardoPosted
  • Highland, NY
  • Posts 169
  • Votes 130

First offer of 265K(ish) countered with 345K.. looks like we are way off.  Going to have to get creative and stand firm on max offer.

Post: Commercial/Apartments Deal Analysis

Frank GucciardoPosted
  • Highland, NY
  • Posts 169
  • Votes 130
Originally posted by @Bennet Sebastian:
I would add at least a 5% factor to the restaurant lease. Try and get current and historical financials from the operator to get a better feel for the durability of their lease payments.

All in all seems like a great opportunity if you know what you are doing - despite the initial low performance.

Bennet

 Done.  I have a very strong case for assuming the existing balance and max of 10K cash on top of that.  happy to walk away from this deal as I dont want to assume their headache and I'm confident in my numbers.  Someone else can overpay if they want.  

Thanks for everyone's advice.. very much appreciated.  

Post: Commercial/Apartments Deal Analysis

Frank GucciardoPosted
  • Highland, NY
  • Posts 169
  • Votes 130
Originally posted by @Michael Leffelholz:

@Frank Gucciardo I am not sure if I missed it in your #'s but what are you budgeting for vacancy/credit and repairs/maintenance and management. With the unit mix of studios and one bedrooms you should expect a more transient tenant base and the costs that go along with the unit turnovers.  While the restaurant seems to be established those types of tenants Generally have a high failure rate.  If all looks good after taking these things into consideration then I wish you best of luck with the acquisition.

Regards

Michael

I didnt break out specifically, however, 5% for vacancy (1% over area average - and I didnt include the restaurant in the calculation due to their ongoing lease.. should I have?), 10% for Repair/CapEx, Self Manage but allocated 5% for that as a buffer.

One other question - When submitting an offer, would you typically also provide some level of analysis that shows how you arrived at the offer?  

Post: Commercial/Apartments Deal Analysis

Frank GucciardoPosted
  • Highland, NY
  • Posts 169
  • Votes 130
Originally posted by @Steve Vaughan:

I see.  Thank you for clarifying @Frank Gucciardo.  So, at your price of $310k, you would put down $56k for a property that needs a lot of work and will lose money for the first year?

I agree the assumable financing is attractive.  I would tell the seller I need all my money for fix-ups and will put enough down for closing costs/ commissions if I went ahead with it.  He is the one in trouble.  He made a mistake and will have to take his 'equity' in favorable (to you)  installments.  Never buy just so someone else won't get it!

Last thought is the offer price.  Whatever price you offer, don't do a nice, round number.  Offer something that looks like it was a result of complicated analysis - like $303,462.  $310,000 looks like what it is - PFA.  Good luck!

 Thanks again Steve,

The more I look at it, my going in offer is going to be 254K + 26K in cash - 280 all in (thank you for the tip on not rounding the offer).  If we go up from there I will reduce my cash "down payment" and shift to more seller financing.

Again, I appreciate the feedback.. very helpful.

Post: Commercial/Apartments Deal Analysis

Frank GucciardoPosted
  • Highland, NY
  • Posts 169
  • Votes 130
Originally posted by @Steve Vaughan:

Hi @Frank Gucciardo!  Looks like you have done a ton of analysis on this property.  Lots of work, aren't they?

I've skimmed your numbers.  I hate to lose money from day one, but can potentially overlook that with great terms.  Can you speak to the financing terms you are proposing?  Is it a low money down assumption or seller-carry?  Do you have to seek a commercial loan with 30% down?  

Without easy, favorable terms, I don't buy things that lose money for the first year. Too much work! 

What is the seller motivation for selling? Is this listed with a realtor? An REO?

 I also have as much interest in the seller situation as the  property itself.  Having to deal with realtors, banks,  attorneys & 'committees' knock the deal potential way down for me as well.  Cheers!

 Thanks Steve

The 254K balance of the current commercial mortgage is assumable (1% fee from the bank) - 15year Cash Mortgage @ 5%.  12 years left on the loan (original balance was 277K).  I will not have to put anything down on this since it is assumed from the owner.

Anything above that 254K that is agreed upon will either be 1)Cash out of pocket, 2) Seller Financed, 3) 401K loan.  All three options are dependent on where we land in terms of buy price versus how much I want to put out of pocket, what they are willing to accept for seller finance.. etc..  this is the unknown until I decide to and then submit my offer.

Listed by a realtor, no REO. Apparently the owners (husband and wife) didn't realize what it takes to manage a property, have little kids, etc.. and want out. Frankly, the place is mis-managed and will take some work, time, and pain to get to where it should be. The current owner is sitting on a goldmine in the upstairs apartment and doesn't want to spend the 20K to make it rent ready.

Agreed on hating to lose money on day 1 and it is not ideal for me as well.  I do hate to see all the potential here and let someone else pick it up with more of a risk appetite.

Post: Commercial/Apartments Deal Analysis

Frank GucciardoPosted
  • Highland, NY
  • Posts 169
  • Votes 130

Bumping to see if can get some feedback on this deal.  Thanks in advance!

Post: Commercial/Apartments Deal Analysis

Frank GucciardoPosted
  • Highland, NY
  • Posts 169
  • Votes 130

I see the table didnt work in my post.. here is a better version of those jumbled #'s at the bottom:

Mo. Mort $3108 (for all three years of analysis)

Mo. NOI (Three Years): 2636, 3825, 4083

Mo. Cash Flow (Three Years): -472, 717, 975

Annual Cash Flow (Three Years): -5668, 8604, 11705

Per Door (Three Years): -67, 102, 139

Cap Rate (Three Years): 10.2, 14.8, 15.8

CoC (Three Years): -7, 10, 14


Post: Commercial/Apartments Deal Analysis

Frank GucciardoPosted
  • Highland, NY
  • Posts 169
  • Votes 130

Hi All,  This is a complex (for us) opportunity that I'm going to lay this out as concise as possible.  I'm sure this is a cake walk for most but would be our first property and is larger (# of appts) and includes a restaurant and storefront.  We weren't event thinking of getting into commercial right away, however, this opp presented itself and is hard to ignore.

Property Info:

Asking 349K 

Max Offer 310K

3 stories built in 1920.  North of NYC with easy access to transportation. Vacancy rates of 3.5-4% and rents growing in the 7-10% range annually.  It's NY so taxes are high.  The exterior has been updated and is in excellent condition.  Metal roof (needs to be inspected).  Furnace is less than 10 years old. 

5 Apartments; 3 Studios and 2 1bd/1ba - All currently leased on 1-year leases that switch to month-to-month at end of year.  All rents are consistently $100-150 below market value.  The building owner also pays for heat and hot water (which is crazy at such low rents).

6th Apartment: on 3rd floor, needs work (floors, paint, doors, Kitchen, Bath, and some other minor stuff.  Also needs to install sprinkler system from appt door to egress (6K estimate from two local companies).  I'm figuring 12K to get the appt rent ready (maybe less) and the 6K for the sprinkler system - 18K total in expenses.  This is not rented as it is not up to code.  Could be either a 2 or 3 bed appt with rents in the 1000-1200 range.

Restaurant - on a 10 year lease with 7 years left.  I think the rent is low but need to do some more research on going rates.  Not much I can do about it since the agreement would still be in effect.  There is a 3% annual increase in the agreement.  It's a busy place and we eat there all the time so I don't think it's going anywhere.

Storefront - small, currently has a clothing shop in it that rents for a reasonable amount.  It has been a revolving door and hopefully this place sticks around.  The restaurant has an option to expand there if they want it.

Current Rent Roll - $5136 Mo. / $61,632 Yr.

Expenses (Taxes, Gas, Common Electric, Repair fund, Garbage, Fire Alarm, Insurance, Water) - $2,500 Mo. / $30,000 Yr.

NOI - $2,636 Mo. / $31,628 Yr.

Mortgage - The balance of the comm loan (12yrs left on 15yr term) is 254K - 2,190mo.

They are open to seller financing the balance of whatever is the accepted offer.  I also have opp to use cash/401K loan to finance the balance.

This place is a money loser (read poorly managed) with the current #'s but has value if 1)I can get the rents up (figure over a 2 year period) and 2) I can get the top floor up to code and rented out.  Here are the #'s for the next three years with getting the appts up to market rent and the 6th appt rented (all in 2016).  Max offer of $310,000:

Item Curr 2016 2017
Mo. Mort. 3108 3108 3108
Mo. NOI 2636 3825 4083
Mo. Cash Flow -472 717 975
Annual CF -5668 8604 11705
Per Door -67 102 139
Cap Rate 10.20% 14.81% 15.81%
CoC -7% 10% 14%

Any and all feedback is appreciated.