All Forum Posts by: William Joseph

I am looking for advice on how an investor would handle the following: (property located in Connecticut)

Purchased a commercial office building. Purchase price 300K (cash). Needs about 10-15K in repairs/updates and has ability to double rent roll given the vacancies and current low rates. ARV is probably conservatively $385-425K. Main motivations for purchasing are because flipping inventory is very low and found myself sitting on too much cash. Needed to do something to operate. I also could conservatively occupy 30% of the building myself as owner occupied. I am not sure I could get to the 51% ratio.

What is the best strategy to get as much cash out of the property as possible in 6 months? Want to hold onto. From my research it appears a commercial loan is best. Not sure SBA 504 is an option. 

Any thoughts?

I am happy to share my bid list with you. I have 3 separate GC crews in this area. Message me. 

Just want to add the property management point of view on a property this size. This property is starting to border on the size where a building superintendent would provide value. You likely will need a quote for common area cleaning and even taking the garbage out to the street depending on the asset class and set up. These are not traditional PM items covered on the x% of gross rents contract. Giving a tenant a break on a lease (assuming you are not doing a value add play) to handle some of these items could save you money over the course of a year. 

Right now the fix and flip market in CT is super competitive. I have been consistently flipping about 6-7 deals a year since 2012. The past year has been the most difficult to find quality deals. Plus, with the lack of REO inventory the competition is even stiffer.

You can likely get a hard money loan but will need money down and your terms will be 12/3 as a newbie. This puts you at a serious disadvantage over someone who is all cash on a deal.

I do not know your background but I think the most advantageous thing you could do right now is this market is to get your real estate license. I actually have no idea how some flippers operate without their own license and MLS access. You will get comfortable coming up with your ARV and save significant money if you get your license.

Wish I had some better advice for you but it is a very competitive industry.

Have you considered staging the property? When I am unable to sell a flip I take it off the market, get new pictures and do staging. I find this will sometimes increase interest. 

We use Buildium for our management portfolio. Very user friendly. I would say the one drawback is that if you have to onboard a portfolio that used a very detailed quick books based financial budget that the owner is wed to you need to do some work to get it to match.

I have internally debated who should get the late charge for years. Currently, all late charges at my management company get passed on directly to the property owner. My logic was just as you posited. However, what we just went through and still going through with this pandemic the burden on our collection process increased 10x. More delinquencies, more calls, more conversations with tenants, more payment plans, more interpreting executive orders.

I am thinking of doing a hybrid process where the late fee is split between owner and property manager. Once the dust settles on this nightmare I will make my final decision. 

When you approach rehab costs you should be able to separate them into categories. It makes it easier to analyze than a total scope of work. For example, you should know your material/labor costs for things like paint/tile/floors. Use the same material and basically tell a contractor what you will pay for labor after researching costs. This is an area where you can see substantial savings in a project and get some predictability. When it comes to the trades, electrical/plumbing/mechanical don't try to get it done on the cheap. Getting the major stuff done licensed, with permits, correctly and on time is more important than saving a few dollars. This is not an area of savings and it will ALWAYS come up on a home inspection. However, doing some of the small items like toilet, vanity, face plates, light fixtures, etc. may be able to be done by a handyman or laborer at a significant savings.

Cabinets can be another area where you can save money. I pay someone to design the kitchen, purchase the cabinets wholesale and then get installed by an hourly guy. I broke the process down and separated our the mark ups. 

The projects you want to get as many bids as possible will be things like roof, siding, windows. This is where bids can vary in my opinion the most.

The rehab control and cost process is a tricky process but keeping track of historical prices, paying contractors on time, and having a Rolodex of multiple vendors for each task is the key to finding substantial savings. 

If you are trying to sell the property you could see if you could escrow the estimated payoff (even if bogus) and deal with the release issue post-sale. Need to get your title company on board.

It is standard language. I agree with the above poster, it is one-sided. If you were going to negotiate you would negotiate a negligence standard of care. I don't like the paragraph below regarding mistake of law either.

"The PMIC also shall not be liable for any error of judgement (sic) or for any
mistake of fact or law or for anything which PMIC may do or refrain from
doing, hereinafter, except in cases of willful misconduct or gross
negligence."