All Forum Posts by: Sean Williams

@Mike Wright just sent you a DM for a solid commercial lender. 

@Joseph Nance I've got some great recommendations at Liberty Financial and private banker at Republic as well if you want to shop it around. Liberty has been very aggressive with refinances on commercial properties, only catch is one of the members of the ownership group has to be local. 

Hey Mahtaab, I'll shoot you a DM with a couple recommendations for the Lexington area.

I have seller with the following situation:

$240,000 single family house

$165,000 balance due on mortgage ($159k balance + $6k in past due pmts)

$950/month (PITI) is the current mortgage payment @ 3.875%

$1,400/month Market Rent

If the seller listed the property, they would walk away with roughly $60k after commissions. However, they are willing to sell fast at $220k and take payments on their equity. Any ideas for the best deal structure?

My thoughts were:
-Purchase at $220,000 with subject-to financing
-Pay the $6k to get mortgage current, then take over the existing mortgage/payments
-Give seller 2nd lien position and pay them $500/month (100% go to principle balance on 2nd lien)

This essentially becomes a break-even (or small loss) situation on monthly cash flow, but I own the property with $0 money down and get the benefits of depreciation. If interest rates goes down, I can either refinance to get seller whole or sell for a small profit.

Any other deal structure ideas?

@James Wilcox No CUP is required since its zoned commercial C-2 so they can keep running it as usually.

Investment Info:

Large multi-family (5+ units) buy & hold investment in Louisville.

Purchase price: $1,250,000
Cash invested: $2,100,000
Sale price: $4,773,000

After a 3 year redevelopment project in the urban core, I am happy to say we exited this property and business in August 2023 for $4.7M.

BUNGALOU "Stay & Play" is a concept we brought to life as we redeveloped a dilapidated 12-unit apartment complex from 2020 to 2023. At completion we had 10 Luxurious Airbnb-Style Suites that could sleep groups of up to 50 guests, NEAT Bourbon Bar (one of the top bourbon bars in the country), a 3,000 sqft Turf Gameyard, and a Private Rooftop Deck.

What made you interested in investing in this type of deal?

Initially we wanted to rehab the apartment complex into long-term rentals, but after running into major structural issues and going WAYY over budget, we decided to pivot and focus on building one of the top STR's in the country.

How did you find this deal and how did you negotiate it?

Our electrician was doing some work for the owner and caught wind that they may be considering selling. We called the owner the next day and was informed they wanted $1.5M for the property. We met the owner the next day at her house and may an offer for $1.25M which we put under contract.

How did you finance this deal?

💸 PURCHASE 💸
:: Jan 2020 for $1.25M
:: Off-market deal - referral from our electrician
:: 12 unit dilapidated apartment, zoned commercial
:: $3.5M Purchase + Construction Costs (Combination of rehab loan + private financing)

Majority was construction financing through a local credit union we had an established relationship with prior, however we did have to also bring in private money multiple times to finish the project.

How did you add value to the deal?

Everything was completed renovated top-to-bottom, but the real kicker was creating a brand identity around the property known as "Bungalou". Another contributing factor was getting a quality tenant (Bourbon Bar) that shared a special synergy with the property that really helped to attract our guests and bring in high-dollar bookings.

⭐️ FINISHED PRODUCT ⭐️
:: Onsite Bourbon Bar Neat Bourbon Bar & Bottle Shop
:: 3,000 sqft Gameyard
:: 750 sqft Rooftop Deck

What was the outcome?

💰 SALE 💰
:: Listed for $4,875,000 in May 2023
:: On the market for 17 days
:: Multiple offers received
:: Closed August 2023 for $4,773,000

Lessons learned? Challenges?

🔥 CHALLENGES 🔥
:: Covid (business partner nearly died) + delays w/ permitting
:: Tenant evictions (had to pay them to leave)
:: Bad contractor (had to fire and finish ourselves)
:: Major structural issues
:: Lumber going ⬆️ 4x's during framing
:: Delays w/ supplies and furnishings

Biggest thing I learned is getting out of your comfort zone, and to know there is always a solution to most challenges if you are willing to open your mind and get creative.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I represented our group on the purchase and sale, however my business partners had experience in real estate investing and commercial construction. Having a quality team where everyone works well together was instrumental during the most difficult of times.

Investment Info:

Large multi-family (5+ units) buy & hold investment in Louisville.

Purchase price: $1,250,000
Cash invested: $2,100,000
Sale price: $4,773,000

After a 3 year redevelopment project in the urban core, I am happy to say we exited this property and business in August 2023 for $4.7M.

BUNGALOU "Stay & Play" is a concept we brought to life as we redeveloped a dilapidated 12-unit apartment complex from 2020 to 2023. At completion we had 10 Luxurious Airbnb-Style Suites that could sleep groups of up to 50 guests, NEAT Bourbon Bar (one of the top bourbon bars in the country), a 3,000 sqft Turf Gameyard, and a Private Rooftop Deck.

What made you interested in investing in this type of deal?

Initially we wanted to rehab the apartment complex into long-term rentals, but after running into major structural issues and going WAYY over budget, we decided to pivot and focus on building one of the top STR's in the country.

How did you find this deal and how did you negotiate it?

Our electrician was doing some work for the owner and caught wind that they may be considering selling. We called the owner the next day and was informed they wanted $1.5M for the property. We met the owner the next day at her house and may an offer for $1.25M which we put under contract.

How did you finance this deal?

💸 PURCHASE 💸
:: Jan 2020 for $1.25M
:: Off-market deal - referral from our electrician
:: 12 unit dilapidated apartment, zoned commercial
:: $3.5M Purchase + Construction Costs (Combination of rehab loan + private financing)

Majority was construction financing through a local credit union we had an established relationship with prior, however we did have to also bring in private money multiple times to finish the project.

How did you add value to the deal?

Everything was completed renovated top-to-bottom, but the real kicker was creating a brand identity around the property known as "Bungalou". Another contributing factor was getting a quality tenant (Bourbon Bar) that shared a special synergy with the property that really helped to attract our guests and bring in high-dollar bookings.

⭐️ FINISHED PRODUCT ⭐️
:: Onsite Bourbon Bar Neat Bourbon Bar & Bottle Shop
(best damn bourbon bar in KY!!! 🥃)
:: 3,000 sqft Gameyard
:: 750 sqft Rooftop Deck

What was the outcome?

💰 SALE 💰
:: Listed for $4,875,000 in May 2023
:: On the market for 17 days
:: Multiple offers received
:: Closed August 2023 for $4,773,000

Lessons learned? Challenges?

🔥 CHALLENGES 🔥
:: Covid (business partner nearly died) + delays w/ permitting
:: Tenant evictions (had to pay them to leave)
:: Bad contractor (had to fire and finish ourselves)
:: Major structural issues
:: Lumber going ⬆️ 4x's during framing
:: Delays w/ supplies and furnishings

Biggest thing I learned is getting out of your comfort zone, and to know there is always a solution to most challenges if you are willing to open your mind and get creative.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

I represented our group on the purchase and sale, however my business partners had experience in real estate investing and commercial construction. Having a quality team where everyone works well together was instrumental during the most difficult of times.

Converting school into 60 unit hotel for just a $1M ($10/sqft) and a free building? Wheww, I need your connections...

I've executed some 1031's but obviously you'd want to verify this with a 1031 pro...

I believe you could have him 1031 into one (or all) of the properties as TIC. Few things to consider off the top of my head if I were you:

1. Make sure you spell out everything in an operating agreement upfront in case one of you wants to sell or 1031 your portion in the future.

2. The investor also will likely want to use all of their 1031 funds, and they'll need to abide by the timeframes, debt requirements and purchase price in order to avoid any taxes. Therefore you'll want to verify this property satisfies those figures and timeframes in order to make it possible, or else they could pull out of the deal.

Definitely get with a solid qualified intermediary to insure you're following all the rules to pull it off, or else taxes could turn this deal sideways.

Hi Dylan - thank you for mentioning this, I think that is something we would pass on. But great idea/option!