All Forum Posts by: Robbie Reutzel

@Brian Eppler, I'm sorry to hear about your bad experience.  Unfortunately there are some investors who lack integrity.  I would approach the seller and explain the issues.  Most of the time rehabbers will fix shoddy work if made aware of it.  

Write up a JV agreement or something like that. I think you'll find that most serious investors who have been doing this for a long-time don't make a habit of screwing people out of deals.

@Montray Wilson, welcome to the wonderful world of probate!  You can certainly enter into a contract before it goes through the process usually contingent upon Sellers obtaining a license to sell.  If it's straightforward and all the heirs can be found and want to sell, it can be a really good deal. 

Be warned that these can go wrong easily if there is any family disagreement.  You can spend waste a lot of time on these.

I would try to find a probate investor in your area who knows the process.  It can save you a lot of time.

Good luck!

@Evan Miller, this happens quite a bit.  What we end up doing is collect as much information as possible.  If they're all TAWs you will have to go by what the seller says but you can also knock on the doors and ask the tenants.  You can then adjust expenses based on a few factors:  does LL pay utilities or tenants?  Are the units sub-metered.  Start with expenses at 50% or, if you own a similar building in the area, you can use your own experience for expenses.  If tenants pay utilities you can set them at 45% of income.  

@Dennis Tierney is correct you're going to find it difficult to get financing for this from a traditional bank but there are other lenders you can find. 

You will be amazed at how much paperwork sellers can/will produce once you explain to them you have to set expenses high unless he can substantiate them.  

Good luck!

@Andrew Caldieraro

Age is all relative.  up here in Boston and other places in the northeast, 60s and 70s is newer.  We see stuff all the time in 1880-1920ish.  Just need to be careful with inspections.  You shouldn't have to worry about fieldstone foundations or anything like that like we do.  But to answer your question, age alone wouldn't deter me.  If everything else is much newer it could be a problem but all things being equal shouldn't be an issue in and of itself.

Good luck!

Hi @Renata DeJesus,

Unfortunately, estimating rehab costs is extremely difficult and requires a lot of experience.  I would try to hire a contractor and walkthrough with them to get an estimate or get a more experienced house flipper to help you.  I actually think estimating rehab costs accurately is the most difficult skill to especially if you don't have construction experience. 

The other issue is that cost is very different depending on the region of the country you are in.  In the Boston market new construction can range from $100-300/sq. ft. depending on where you are.  

If worse comes to worse, you could just throw a large number out there and make your offer contingent on verification of rehab costs or something like that. 

Sorry I can't be more helpful.

Good luck!

@Scott P.,

I'm in Mass and we've been in business since 2005.  In commercial an offer is not typically used.  If it's a residential property the offer is used. MA is basically the only state that uses a formal "offer" and then a purchase agreement.  

Nevertheless, all due diligence is usually done prior to the P&S or else the P&S has an inspection clause that gives you an out. Either way there is almost always an out if due diligence doesn't check out.

@Scott P.,

The whole point of physical due diligence, prior to signing the P&S is to have an inspector/contractor check out all systems, roof etc. to make sure they are good to go. Then if they're different than what the seller represented you have ammo to offer less.

@Scott P., 

Unfortunately this is on you. For commercial buildings, we usually use an LOI instead of an offer and it lays out due diligence (i.e. physical inspections, rent audits, T-12) before the P&S is even signed. While we try not to re-trade if the due diligence uncovers what was represented, if it is grossly misrepresented, as it seems to be here, we have no problem revising our offer. The numbers still have to work.

Hopefully you're not out too much money but chalk this up to a learning experience! FYI, I know a great attorney who specializes in investors if you would like a referral. Also happy to share our LOI template if that would help.

PM me and I will share.

Good luck!

@Brian Burke, understood. I assume you were referring to me when you commented about offering half the true value. You obviously have a ton of experience and I won't begin to questions your expertise but this particular property is substantially cash flow negative at 80% of the seller's ask. We obviously do run projections and base our exit strategy on IRR but this was not a case of a workable deal. It's under agreement at a 3 cap.

Totally with you on looking at projections, where we are in the market cycle and value-add potential.