All Forum Posts by: Michael Van

What am I missing here? 123,412 income/11,271,301 price = 1.0949% CAP. I think you meant to say price of $1,271,301. I like the deal. Are your ROI #'s based on a mortgage or are you using all cash to fund this deal.

Hey @Michael Van - I think the easy answer is it depends.  In my opinion, it makes quite a bit of a difference where you are at in your investing career.  Brandon Turner touches on this subject......at first you to generate capital (flipping/wholesaling/high roi) to have before you can invest in bigger passive deals if your end goal is to scale and let your money make you money.

Being another Chicago contractor I'd love to connect and talk more real estate and contracting.

Every Investor is different. For me if I"m buying a class A Retail Asset with leverage then 5-6% is the range I'm comfortable with.  Class A to me is high traffic counts, Long term lease, well known tenant, and max density.  I usually try to have the property cash flow at $1,000 minimum.

A value Add Investor may want to seek these same terms, but knows that there is an additional upside by increasing rents, adding tenants to vacant spaces etc.  

A Wealth Investor may take less of a percentage because they may not use financing and just want to park their cash in a non hassle property like a ground lease.

I wouldn't invest in Residential with only a $100 or $200 profit unless you were improving the value of the property in some way with a lot of upside.  One Repair and the the profit is wiped out.

@Michael Van

I like @Joe Villeneuve idea.  Pick a number. 

A big number, you're in Chicago, opportunities all over. 

No, even a bigger number. 

No, pick a lifestyle.  4 season tickets at the Bulls, 4 at the Blackhawks, 4 at the Bears.  Dock slip for your power boat. AFTER, AFTER, your house is paid, no personal debt, college is covered, etc. etc. Put that out in front of you and start doing deals.

Looked at your background.  You're in Chicago.  You have what we don't have control over.  You're a General Contractor.  Roofs, windows, gutters.  You have other trade contacts and know who is who.  We don't have that.  You know zoning and inspections. It's worth gold today.  There is a shortage of trades.

Situations:

A. I'm just using a figure. Would like to pay you $50 per hour to run GC on a REI deal there. Pick your going rate, doesn't matter. Lifestyle- same as every other person.

B.  Or, you do a flip and make $500,000 in two years.  Doing what you do, just for yourself.  While doing your other jobs.  Lifestyle- See above.  

Working Population, especially Trades:

Getting fewer and fewer.  

Us, REI investors, the Out of State Investors, the financial investors would love to just pay you wages.

You need to stop being an hourly paid employee or a % Cost plus employee.  

Money:

There is tons of money out there.  Don't worry about the money.  Don't put a dollar into any of your deals, just your experience and sweat equity.  YOU are the GOLD.

Contractor Track record:

You got it.  Just need to pull it together and shine it up.

Finding "IT"?

Google Loopnet, chicago, Industrial.  I like NASTY.  I like "ON" the market for ever.  I like Chicago because it's a large fish tank. 

Line up 10 deals in order of preference.  Use your "Buyer" real estate agent on each one.  Give them 3 day offers.  Get mean.  They ask for $2,000,000 you offer $1,300,000.  They say no, $1,700,000; you say so much down $500,000 with Seller financing and a 5 year balloon with interest only during the 5 years, or even interest free during that time period. Keep going down the list.  Someone will bite.

Watch out for EPA, Phase 1, etc studies needed.  Zoning.  Etc.

Example:

5540 Northwest Hwy.  See if it has the BONES.  1950- Abestos.  EPA- what has been in it.  Been on the market for a while.  Next to rail tracks.  Purpose built. Combination of truck docks, small size, Low roof/low doors, large office space too big or small- tied to a warehouse, looks like an elevator shaft on the roof.  This creates a very limited market of buyers and uses.  NASTY.  But looks like Clean Bones.

What do you do with it?

A- Zoning first.

B- Neighborhood needs second

C- Can you split the layout up and have different tenants?  I see a hardcore GYM location on the left, Beer Garden in the middle afternoons to nights, TKD or daycare space on the right in the office.  I would lock the parking area out and make it into open air area. Basically, get people around you and go with their thoughts.  Remember COVID.

Sale:

1- Hold for a year, so you pay Capital Gains and not Ordinary Income.  When you find your buyer, just tell them it's a lease for one year with option to buy.  Put in large lease increases after year one, to keep the deal moving.

2- 1031- The hard part of a 1031 is controlling the sale of your property. Buying a property, is easy unless you're under duress from a 1031 to buy in the time frame.  Check with a 1031 person.  See if situation "1" above fits a 1031 transaction.  If it does, then you have the "Sale" portion covered.  Now take your time and do all of the above all over again.

3.  Don't do 1031- I wouldn't do the 1031.  I would pay the taxes and take the cash.  Remember your money people above.  You want to get rid of them as fast as possible, "UNLESS" you match up with a great person/investor.  Then stick with them.  You will have trouble growing and moving with SPEED.  This person will make that easy.  You want Speed, in buying, in retroing, in selling.

Problem:

What are you going to do with that UGLY/NASTY property?  Talk with your realtor and find out what they "SEE".  Talk with the local business community leaders and find out what they "SEE".  Have your friends who can be open with you that have different life experiences look at it.

Personally, out front, I see blocks of parking that are available after hours.  I see the dock doors wide open. I see a metal add on dock area, I can tear out and leave open for a veranda setting, etc, etc, etc.  An office area, that could be opened up.  

The key is to stop working for US, REI investors.