All Forum Posts by: Tim Rainey

OK, thanks for clarifying that

Can someone break it down for me?

Lets say passive investing $200k in Multifamily Syndication vs $200k down(the rest financed) on small MF IRO property with 12 units at about $800 per door rent. I know that there are lots of variables, but lets say the cap rates between the 2 are similar.

So between the 2 investments of the same amount, does the IRO have a significant tax advantage over being a passive partner?

One potential advantage that I am trying to decide to quantify for the passive is refinancing out and redeploying that cash later.

Yall have justified my concerns. I Need to get that cap rate way up at this interest rate if this is to work, among the other issues.

Thanks

Jason,

I think the reason she is resistant is because she if worried about overutilizing the parking with salons or supercuts. The local agent advising me said he would rent to a salon or supercut in a heartbeat.

I agree, the value add is enticing but gives me pause. 

Agent is telling me he can find me another at 8% cap but it will likely need some TLC or not be in as booming of an area.

What is good Cap rate rule of thumb, if there is such a thing?

Tom,

Yes, I already have financing on the table from a local lender I have done business with before at 20% down.

I did not account for the leasing commission, good point.

I did consider tenant improvement allowance, but was not clear yet on what is customary in the area. When I had rented space in that town about 10 years ago, the owner I think gave me $1000 off of rent for the first year if I remember correctly. But again I dont know what is proper. Do you have any more info on what would typically be done for improvements?

I believe you are right about the property taxes. The current owner has had the property for a long time and I am certain that the property value will have increased considerably.  Makes sense what you said. I suppose that i need to find out how long it has been held and what the property tax difference and bring that to the bargaining table.

Thats a good point about the $21 for the vacant space. I think its likely because the seller just hasnt raised the rent and the agent that I am dealing with is expecting that to be the asking rate by owner. He pointed out though that this rate is below the typical rate in town.

Most of the leases will expire in 1 to 2 years. That could be good as far as renegotiating leases I suppose, but a problem if there are vacancies. 

It does help, I dont want to find these things out after the fact.

Thanks!

Tim

Hi,

I am new to the forum and new to real estate other than my office building for my business. I thought it would be wise to have opinions of those more experienced than I am. So, I pasted the basic cash flow from a small strip center that I am looking to purchase below. The property location is on a main street 2 blocks from the only grocery store in a small but fast growing town. The only negatives so far that I see is that parking is not abundant,  but adequate and there is one vacancy which has interest but the current owner has been holding out for something other than a nail salon or supercuts which are both interested. At any rate, it appears that it could be filled quickly. Also, I understand that the rent has not been increased for some time and is past due for that, so there is an upside.

The issue that I am having is that its not much cash flow at the price, which is 2,250,000 with 20% down. At that rate , the monthly debt is 25 year amortization on a 10/1 ARM starting at 5.50% fixed; then adjust every year to 1 year LIBOR ICE SWAP Rate + 3.25% every 5 years with a floor of 5.50%. Estimated payment on this option would be $11,053.57 per month.

So, once the vacancy is filled there should be $2311 in monthly positive cash flow according to fully rented projected NOI. With 1 vacancy there is only $211 cash flow as it stands now which doesnt inspire confidence to me, or am I wrong. The Third set of figures below is projection with vacancy filled.

So, is the return here typical for small strip centers in good locations? Any thoughts on the deal? My CPA is trying to talk me into just sticking cash in the stock market, but I have lost a lot of trust in that. I would really like some NNN real estate and this one looks the best of those that I have found.

Thanks in advance for any advice.

Tim