All Forum Posts by: Seth C.

I have an opportunity that might hit my numbers on a property that has 6 units.

Pros:

Area is decent, exterior is in slightly deferred maintenance mode, 100/door as-is, rents have room to grow, retiring owner will finance at 3.75% on 30 yr amort./10 yr balloon with 20% down. double digit cash on cash...

Cons:

No photos of the interior, and can't view without offer. I am not even remotely local, but that will be the case for any deal I do. We have property in the city and mgmt in place.

There are probably some serious code violations: the building is slab so water has been run over the top of the roof; a garage has been converted into a unit... 

There is no onsite laundry, laundromat nearby (depending on layout might be a huge value-add bonus--I expect this is the case for a couple units, 3 will never have laundry, maybe a common laundry solution, but I don't know).

As far as I can tell the owners are nice/easy to work with, the realtor is the current PM and is ... not very transparent. I would use our other co for mgmt for sure.

Status:

The city will do a thorough code violation check for $200 with a 2-6 week wait, and I can have code corrections included in the contract. Code violation $ might pay to have laundry installed. They are so disorganized the city does not even know how many units are legal without this check!

If the garage is not legal, 1/6 off my bid (great deal for me because it is the worst unit).

The property is in the 150,000 range--it will never be a huge moneymaker, perhaps a solid $10,000/yr cash flow in a year or two.

Questions:

Is this too much of a PITA for $7200/yr as-is?

What else stands out on this?

Thanks!

I definitely start here or very close to it. At the same time it is frustrating to miss by a small amount. The reality is that the impact on financing and cash flow can make a decent deal a risky one. I think I might experiment with a seller second as a means to make the deal work through aggressive amortization and a better debt ratio, rather than as a means to get a "no money down" deal.

I am not up for non-contingent. Minimal of course.

what repairs are needed?

I am seeing a number of properties in my target markets that are 20-30% above my strike price. Many sellers are willing to drop 10-15%, but what do you do to deal with that remaining 10-15% that will make or break the deal for you? Do you use assessor information to contact owners directly, propose a basically 0 interest seller second, give them a free puppy? What works for you?!

Not in town right now, sorry!

Thanks @Sean Richway. Your offerings sound like they are well planned for the MF market. We will keep in touch.

@Sean Richway  

• How much capital do you have available? 
• What makes or breaks a MF deal for you? 
• Can you post/PM a couple of client references?

Much appreciated!

It seems like you are asking whether you should work as an RE investor or open a mining company as a passive partner (sorry if I misunderstood). I am currently in a busy rock mining area, and even the smallest operation requires a significant amount of heavy machinery, I am sure that size would require no less than 10M. I doubt it would be as passive as you think, and it is a long term commitment. Thus I think it has no value to anyone but an experienced mining company.

Another play would be to try to lease for a base price plus a percentage of gross. You could try for 5-6%, but I would personally be very happy with 3-4%. Realistically, 1-2% sounds like about what you would get. Now I am pulling in those numbers from a completely different industry, so you would need to find someone from the field who knows more than I do.

I can't quite understand the way people are structuring PPMs and talking to investors about their products.

When someone says "I try to get 18-22% IRR for investors", are they talking before-tax or after-tax? If after, after which taxes?

When you have an LLC with a managing partner and a number of passive partners, and the LCC files and pays taxes, what remains for an investor to pay? Does the structure of the PPM matter (3-20 investors)?

many thanks! S