All Forum Posts by: Tom Hertel

Off market deal, a pair of duplexes in a good school district in the suburbs, asking $779k. 

- Gross rents $79,392 annually

- Expenses: $27,677 (this includes property management, taxes, 5% for repairs, 5% to cap-ex, etc) 

- NOI: $47,755

My question pertains to how to offer on this deal. A full market offer (6% cap) would result in a 7.74% cash on cash return based on 3.5% 5-year, 25-year amor, 75% LTV commercial financing that I've been quoted, which is a lower than my desired threshold. To get closer to my desired 9-10% CoC, I could do one of three things:

- Offer less money, something like $740k puts me right at 9% CoC

- Offer the full amount, but ask for some seller carryback (I've been told some carryback is a option). Something like 10% a carryback at the same 3.5% again puts me right at around 9% CoC

- Go for broke and ask for both a lower price and 10% seller carryback which would get me to an 11% CoC.

Would love to year everyone's thoughts. More about me, I have a a secure job that pays me quite well, so I'm not strapped for cash and expect to have more cash on hand in the future. The carryback is not a necessity to make the deal go through, just a bonus to allow me to put my cash into another property. This would be my first deal, and I think it's a pretty good one, so I don't want to blow it up if I go for Option 3 and offend the seller.

Reviving an old thread to ask a question. For Bob (or anyone else who has used the historic tax credit), could you include some example numbers to help us understand how much you actually save?

For example, let's say I buy a historic building for $2 million and spend $1 million in QREs. Let's also say that my state matches the federal 20% credit for a total tax credit of 40%. I'm having trouble understanding how much I'm actually saving. $400k (40% of $1 million)? Some other number? And when is that paid out and from whom?

@Jordan Moorhead

Since I'm in healthcare, I'll be the one to say it: motorcycles are death-traps. I've seen far too many motorcycle riders present to the operating room or ICU with devastating life-long injuries or even worse, end up dead. Seriously, find a different hobby.

Based on my reading of the Sonoma County webpage regarding short term rentals, a vacation rental permit seems much more obtainable than in Napa County if the following conditions are met:

- Has to be zoned as AR, RR, R1, LC, LEA, DA, or RRD

- Have less than 5 guest rooms

- Need to pay the Vacation Rental Zoning Permit Fee ($849.00)

- A Certified Property Manager is required

- And you have to fill out a bunch of forms

As far as I can tell, there isn't a limit on then number of permits that can be issued by the county. This seems like a much fairer situation to vacation rental owners than Napa's shotgun "no-STRs-allowed" approach. 

As a side note, it appears Monterrey County has changed their STR laws as well and it's much easier to obtain a STR permit, though quite pricey (ie $10k+).

I'm reviving an old thread here to ask a new question. I believe you are quoting 41 short term rental permits within the city of Napa (link). My question is, what if you own a home that is not within the city limits Napa or Yountville or St. Helena but still within Napa County? 

For example, St. Helena allows 25 STR permits, and the rentals are listed on this map. But this new property on the market has a guest house that could easily be rented. The kicker is that it's just outside the "city boundary" of St. Helena (at least based on the previously-linked map) because it is on the NE side of Silverado Trail and is NW of Dear Park Rd. Would this house be subject the St. Helen's STR rules given that it's not within the city boundary, or could you rent the guesthouse without restriction?

What I keep hearing is that EVERYTHING is negotiable with commercial loans. I was just trying to think outside the box as someone who wants to retire in 15-17 years and would love to have the security of a fixed rate loan that would presumably be paid off when I retire.

I'm curious if anyone has experience regarding commercial loans that have shorter amortization schedules (ex less than 20 years). Are smaller banks willing to extend the fixed rate period in "exchange" for a shorter amortization schedule?

So for example, rather than having a 7-year fixed commercial loan on a 30-year amortization schedule, are banks willing to simply do a 15-year fixed commercial loan on a 15-year amortization schedule?

Or is this not really a thing and I'm simply letting my spreadsheet-inclined mind wander?

@John D., what's your opinion on the surrounding cities following Palm Spring's example and outlawing STR's for R1 & R2 properties?

What about submetering? I remember @Brandon Turner half-mentioning a company on the podcast that will submeter with wireless tech. After some googling, I think it’s Guardian Water and Power he was talking about (http://www.guardianwp.com/). 

Take it with a grain of salt because they are a for-profit business, but their website says that submetering of water, gas, and electric are all “permitted” in Minnesota. I guess it’s just a matter of cost for installation and maintenance of the submetering.

Does the market really dictate paying trash and water? A lot of places I see have landlords paying water, trash, garbage, and gas (for heating). That’s seems like a lot of unnecessary expenses, but maybe that’s just me?