All Forum Posts by: Todd Norris

I've recently heard several podcast guests (on BP, Real Estate Guys Radio, and others) talking about 25-30 yr commercial loans, some with fixed rate. I've always bought commercial properties through a local bank on 15 yr notes with 5 yr balloon. The bank I've used cannot go beyond 15 yrs for commercial loans. Can someone point me toward a trustworthy loan source (Indiana) who could handle a 25+ yr non-recourse commercial loan on a property of 800k+? Fixed rate would be the preference, of course.

Anyone else using this kind of loan? Any drawbacks? 

Everyone loves a good disaster story, right? Well, here's one for you. 

Someone I know owns an out-of-town rental which he purchased when his daughter was in college (cheaper than the dorms!). He kept the house after she graduated and had a couple renters. Last November he decided to fix it up and sell it. The owner recently got a call from a guy who identified himself as the "buyer" of this house and was hoping to set up a closing date. So the story goes, someone had listed this vacant house on Craigslist and had met with the "buyer" at the property to collect some earnest money ($2,000). Of course, this "someone" was not the true owner of the house. The "buyer" didn't hear from the "seller" for quite some time so he found the owner's information through the county and gave him a call. The true owner then drove to his property to find it stripped bare. Everything was gone (tools, appliances, fixtures, furnace, water heater, everything). He filed a police report. During the investigation, it was discovered that a suspicious neighbor had taken a picture of the two guys at the property when the earnest money was changing hands. Turns out, the "seller" who collected the earnest money was a former tenant! The police were able to run a search on the "seller" based on the true owner's tenant records, and it was discovered that the guy had done this before.

Lesson: Do your homework before you buy something from Craigslist! A quick trip to the county clerk's office can get you the name of the owner. Match up the ID of the person collecting your earnest money with the name on the county records. If they don't match, do further investigation or just walk away from the deal. Isn't life interesting? :)

Interesting idea. What's your business plan?

@Mark Creason - exit strategy is death and a will :) I'm a buy & hold guy, so I'm planning to keep it long term. I suppose I could choose to sell that park in order to buy some other buy & hold property. at a minimum, i'll do the necessary improvements and keep it a couple years to demonstrate improved income potential.

@Joe Fairless  - thanks for your perspective. No doubt that I'd love a 20% return on a bigger investment. that's exactly why I'm in the market for a bigger facility :)

@Mark Creason - yep, still a couple manufacturers up here. Skyline, Sherlock, and Redman come to mind. I own one mobile home park in Rochester, IN. We'll be replacing a few units soon. I was thinking of buying used instead of new. Do you buy new?

Thanks to both of you for the responses. We use a property management company for our properties (actually a mix of duplexes, mobile home park, and 12-unit multifamily). We invest in the South Bend, Fort Wayne, Warsaw triangle b/c I live in the middle, and I like to stay close to my rentals. I'm used to a commercial loan on a 30-year amortization with an every-5-year percentage adjustment. I did not know about the non-recourse loans. that certainly has some appeal! Thanks for that tidbit!

I heard Ken McElroy say you need 1 maintenance and 1 manager for every 100 units. I'd really love to aim at something of that size. I just need to make sure the rate of return makes sense before I sink the bulk of my money into it!

I have several small multi-family properties, and the cash on cash % return in my area (Northern Indiana) hovers around 20%. I'm thinking of taking the plunge into larger (50+ unit) apartment buildings/complexes. As a general rule, is the cash on cash % return higher or lower for a 50+ apartment complex than a duplex?

I know that every property is different, but I have found the 20% cash on cash % return figure to be a pretty good indicator of a good duplex. Apartment buildings seem to be all over the place...even in the same market. 

Thoughts? 

Chris Adams , i know this thread is kinda old, but I'd be interested in a meetup if we can get some people together. i invest in goshen, warsaw, and rochester.

Our 12 unit in Indiana required 56k cash to close. We cleared 16k cash last year after all expenses including debt service, insurance, taxes, property mgmt, and repairs. Our loan in on a 15 yr repayment schedule. Our duplex and MHP are too new to have a full year actual income calculation, but things look quite similar. That said, I'm not finding many new prospects that compare.

I am a fairly new Buy and Hold investor (3 properties thus far), and I'm looking for #4. I have identified a few "ugly house" duplexes in a good market near me that are not yet on the MLS. The owner is willing to sell them for a good price. Each will require 10-15k in repairs. I typically buy through the MLS and get an 80% commercial loan through the bank based on the purchase price. However, I've never bought a property which required significant repairs. If I buy it at the current price, my loan will only be 80% of the current value (prior to repair), and I'll end up spending cash for the repairs. Is there any way to structure the deal so that I could end up getting the loan for 80% of the ARV? Otherwise, I'm really compromising my cash on cash return. I would really appreciate some advice. Thanks in advance.