All Forum Posts by: Yoni R.

@Walid M. Thank you for the insight. I think you are right about securing a long term tenant even if I have to give him a slight discount on rent. Truthfully, I don’t think I will buy it if the tenant won’t be willing to sign a 3 year lease prior to closing. When you buy deals like this do you factor the purchase price according to the actual current performance or do you go off of a pro-forma? Right now about 40% of the warehouse is not occupied.

@Brett Peters thank you so much for this amazing answer. Really really helps. If you were here in South Florida I would bring you on to advise on this deal in depth.

I also thought it was NNN lease at first but the landlord is paying property taxes and HOA. The tenant pays electric, water and insurance. Sort of weird. I also would have thought a warehouse would be a triple net lease.

I looked at the deed and it seems that it was a sale and leaseback, so the current tenant is actually the past owner.

If I go by your suggestion then the numbers are:

Income:

Current rent: $9,000

Expenses:

HOA: $850 monthly

Property taxes: $12,000 yearly

Misc/Maintenance (guestimate): $500 monthly

Total: $2,350 monthly

$9,000-$2,350=$6,650

$6,650 x 12 = $79,080 NOI

Let’s say a 10 cap... $79,800/0.10 = $798,000 purchase price. And that’s without taking into account the current vacancy or the upcoming end of lease.

Only problem is the current owner bought it less than a year ago for $1,000,000.

On the other hand if I take into consideration that it can be completely vacant for 6 months even with 75% financing $4,500 monthly, it will cost me about $8,000 holding cost a month or a total of $48,000 for 6 months.

At 80% occupancy let’s say the warehouse can bring in $12,000.

$12,000-$2350 = $9,650

$9,650 x 12 = $115,800 NOI

$115,800/0.10 cap = $1,158,000

$1,158,000 - $48,000 6 month vacancy cost = $1,110,000 purchase price

How can I really check the going rent or rent per sqf for a warehouse like this to make sure the current lease of $9,000 is realistic?

Anybody deal in warehouses???

A deal fell on my lap to purchase a commercial warehouse. It was built in 2004 and also has office space in it. It’s 8,600 sqf and is two stories. They are asking $1,100,000.

Currently only one tenant occupying about 60% of the warehouse paying $9,000 a month. Tenant pays electric, water and insurance. The tenant is on a yearly renewable lease.

There is a separate entrance so the other 40% of the warehouse can be occupied by a different tenant if wanted.

HOA is $850 /month

Property taxes is $12,200 /year

It’s located in a complex of warehouses and everything looks very kept up and everything is pretty much occupied there. located near the new Amazon fulfillment center in South Florida.

The only problem is I don’t have knowledge in warehouses. I’m a multi-family investor...

What do I need to look for? What is the going cap rate on warehouses? How easy is it to find tenants? Any help will be greatly appreciated here. Thanks to all.

Thanks for the answer appreciated, but my questions was more along the line of if there is a default on the loan for ABC LLC and I am personally guaranteed on that loan.

Let's say $1 Mil loan and there is a default on the property and it goes to foreclosure and is sold for only $750,000. I am now personally on the line for the remaining $250,000. Can the debtor now go to XYZ LLC (who I have a partner in) and pierce the veil of that LLC in order to take my shares or take money or assets in order to collect on the $250,000 debt? Or can they only come to my personal assets that are in my personal name?

I need to personally guarantee a mortgage for a refi that I am doing on an investment property of mine. The property is under an LLC.

I have other properties that are owned with other partners and those are also in LLC’s.

The question is if the other LLC's can be pierced due to my ownership in them if the personal guarantee on that other mortgage I have is activated?

For example: Property 1 owned by ABC LLC (I am 100% owner). I have a personal guarantee on the mortgage.

Property 2 owned by XYZ LLC (50% me %50 Bob)

If there is ever a situation that the personal guarantee for ABC LLC is activated and I am now personally on the hook can the indemnitors now go after XYZ LLC or after my shares in XYZ LLC?

That’s great to hear that. Did they require a seasoning period in order to get that or they didn’t care?

Wow. Did the lenders mind cashing you out on the refi because you didn't have any skin left in the game?

Definitely depends on your goals to be able to answer this. We are still growing our portfolio so we are looking for the leverage. Regarding the risk tolerance I don’t really worry about that. For affordable housing, rents don’t really fluctuate. So even if the economy takes a hit the rents pretty much stay the same. We average an above 10% cap rate on our portfolio so even if rents went down a little we would still be happy. 

The only thing one needs to be careful about is if property prices take a hit and you are at the end of your mortgage cycle and the bank decides to not refi the loan or only refi at the new lower value. For example a 10 year mortgage ammortized over 25 years. This will put ones self in a position that you will have to bring a lot of cash from home. This has to be planned ahead of time and have reserves put aside. For that reason we do not leverage at more than 75%. 

We wish her the best of luck. If you are mentoring her and you have the experience to do so then that is great. She just needs to make sure that there is an actionable plan in place and enough knowledge to get started prior to doing something like this. If there is a good reason to immediately quit her job at this stage as part of a structured plan then that is fine. 

Nobody obviously knows her personally so we don’t know her situation. To open up an llc, buy a domain and read an ebook usually does not yet require you to quit your job... But as you said to each his own.