All Forum Posts by: Zachary Curry

@Roland Thomas

I review returns from a banking perspective.

First look at the 10 year bond yield. 10yr Bonds

Then evaluate your local inflation rate. HPI Summary Tables

Take the qtr inflation rate and the 10 yr bond average and you should structure your current deal with that standard. They are usually similar but you want to outperform these metrics. Currently they are low. So a 2% would be healthy. 

Example:

Florida 1.99

10 yr bond as of yesterday 1.85

This would be a minimum of 1.92

You can do this is a hyperlocal market as well which will change a rural area will under perform vs. a metro.

The reason you use these numbers for yourself are to provide a risk margin for your investment. Less risk to invest in a guaranteed 10 yr bold yield. So if you incur more risk you should incur more return. It also shows how to structure a deal for a tenant long term securing a trend in rental increases appropriate for the current markets. Meaning they benefit from signing a 10 year lease rather than a 5 year not knowing what future markets hold.

Amazing people mostly volunteers. They will be able to really assist you.

naca.com

What do investors have in common? They have to bank somewhere.

I had to think about this one....

But I would start by calling all of your local SBA lenders, setting up appointments and pitching to them. They probably have someone that could diversify their portfolio and guess what, if you have a solid pitch (Features & Benefits) then they will have pre-approved buyers.

Roland congratulations on sourcing a commercial deal. Currently as Hedge Funds are experiencing major outflows and high volatility we are seeing these large institutions begin to invest largely in commercial real estate to provide a base line growth from the steady returns commercial real estate provides. Houston is a great are to be in as the growth, despite the oil turbulence, is quickly growing.

Commercial Real Estate is fun and can provide amazing returns.

If the numbers work meaning asking and rent roll, and you return a profit then move into what terms are provided. Are the tenants paying for CAM or common area maintenance? Are the tenants a triple Net meaning they pay taxes and all costs associated with their lease?

If these are all yes then proceed.

Now what type of returns are you wanting and look 3, 5, 10 years and review the tenants as most commercial spaces provide for long term tenancy. Are these current lease terms going to provide the long term gains you are looking for? 

Something to review since this is a business environment is what type of business are the tenants participating. Law offices which are consistent or a call center which may or may not excel over time?

Additionally look to any value add scenarios. Is the space large enough and positioned that if you were to contact a lab corp or a ct scan franchise company and provide them with lower rent, to latter attract doctors turning your office space into a medical office building to achieve greater returns? Hospitals in close proximity are not competition they are complimentary***

Also what industries are exploding that you could reposition your building appropriately, such as upgrading the building with high powered networking infrastructure. Imagine buying an office building in Palo Alto 15-20 years ago what return you would have now. 

Contact your local Chamber of Commerce they can assist you with a lot of information, they will even have members looking for office space if you have vacancies. Another great contact is your local business development in the government. These are the agencies that are actively seeking new companies and they provide tax incentives for them to open offices.

A "bad" commercial deal would consist of tenants not paying for Common Area Maintenance, and long term leases with low incremental increases in rent.

So things to ask.

What type of leases do the tenants have?

What long term projections/Return on investment will I receive?

Are there any long term value add positions to achieve greater returns?

Good luck, and think big.

@Justin Baldauf Either. It just reassures their active management, either way. It is important for those who work hard be rewarded as such.

Recently wrote Underwriting Software. I want to give it away for free but the criteria is constantly changing. Anyone have ideas? I am open to any and all feedback.

https://youtu.be/SmFNXCLQGh8

Welcome.

Movoto is a good source of demographics

Dare I say Zillow is decent not always accurate

Google in your area recently sold often realtors will integrate the mls into their sites and show recently sold for their area.

Also you can download tool for calculating and evaluating flip and holds. Single Family Calculator

Click SFH.Review; Open; Enable Macros

It is a simple excel based program to help you review your deals.

Good Luck!

Evaluate your costs. Are they being diminished due to vacancies? Home maintenance costs? Property management fees?

You might like the COC dogs but lets turn your others into Cash Cows.

Most often current rental rates are the market values for the home based from a three year market value. Meaning if you bought the home in three years what would your monthly payment be based from market value per month.

So knowing this you are able to provide the home as a rent to own (Must keep option separate from rent due to Dodd Frank). So the new tenants would have a long term lease (three years) and would be responsible to maintain the property in full. They will also be agreeing to buy today paying what the home is worth in three years. This eliminates the vacancies, maintenance, etc and provides a valid exit strategy. Also if they choose not to buy the home you still keep the fee for the option.

This might be confusing you can email me for clarification.

If it ain't broke, don't _______________________?

If you have successfully managed to maintain your FHA payments and it has cash flow then why change a formula that has worked for five years? Instead look to your next deal that will cash flow. Because when you refinance it will alter your ability to pay, it will lower your largest credit lines history, and it will increase your interest rate on your new loan. Meaning, you will loose more money over time.

Just an opinion and remember your MIP will end after 15 years of ownership or at 78%ltv.

So you could pay down the FHA to meet this threshold, and buy the second property. It depends on the dollar amounts you are referencing but simply. I would not refinance the first FHA loan.

Air BNB.

There is so much established competition that enables other to proceed in this manner without pulling money. Otherwise you would be looking for a REIT(Real Estate Investment Trust). These typically focus on credit worthiness and long term tenants providing returns congruent to inflation.