Yeah, I had the same feeling. Their explaination involved a lot of "buckets" talk. As in, they have too many eggs in this bucket (multifamily investment properties I guess) and they need to wipe the bad ones off their books.

It is very difficult to determine their actual market value at the moment.

If you go with a standard 6.25 GRM, Building A is worth 240k (which it is currently listed at), and Building B is worth 221k. The problem is, investment property is at a standstill in this town as far as conventional sales go. So if you are looking at actual sales history, you find a bunch of bank auctions where the buildings are going for <10k/unit.

From talk with auctioneers and RE agents, the only "players" in town right now are the ones with cash on hand looking for a steal.

If we had to auction within a couple months, we'd probably get less than 100k each. But if you're measuring by income, they're probably worth closer to 200k.

Didnt really consider this, but it is a good suggestion.




This is a great idea, and its something I've been doing wrong.

My process has essentially been: Contact, meet up, discuss history/options/etc, banker asks for list of information, I provide information within 24hrs, the waiting game begins.

I'll be putting together this binder today, and I expect to use it as a template for potential future investments. TY.

Great advice all around - I'll need to improve my salesmanship a bit.

My only concern is the 3-year performance history. The response we get generally boils down to a single number based on this performance. "oooh, this # is a 5, and we really like to see a 6 or higher". I dont know the specifics of what they're calculating, and they probably want it that way. Going from 4/19 > 16/19 rented seems like a good story, but I guess I need to line my **** up and sell it better.

On the job! Thx spex!

I'm not looking right now but the one commercial property that has come across my radar is a strip mall in the same situation.

The owner has made all payments (but occasionally late although he always pays the fees or whatever) and has been paying for like 10 years, but for some reason they have decided to to renew.

This is in LV too where every bank owns more property than it wants to.


I think a lot of these seemingly awful bank decisions are motivated by regulatory concerns that we are not aware of.

im looking to buy some commerical real estate,,, What books should i read

Just finished my second read through of this thread, great!!! I don't remember this being asked so apologies if it has been.

What is the flexibility of your schedule like? I remember you said you work about 20 hours a week now, but how much control do you have over which hours you work during the day, which days you work, and how many days you can take for a vacation? Also if you don't mind could you tell me what it was like before you hired your managers. Thanks a lot!

I've read the entire thread in the past 2 days. Forgive me if this has been asked and answered.

How do you determine FMV?

What if the place you want to buy was not used as a rental property? How do you determine how much it can be rented for?

These questions are linked, obviously. Look at Zillow and the surrounding houses for tax assessments and previous sales? I don't know if a realtor will give you an honest or accurate assessment. I'm sure, with some experience, looking at the house will give me a good idea of FMV, but what else can I do without actually looking at it?

Kurosh,

For market rents, check out www.rentometer.com

I plugged in my apt's info, along with a few around the area, and it's surprisingly accurate. Granted, since it's on a sliding scale there's plenty of room for error, but it at least gives you a good idea.

If there are any comparable properties close by for rent, call and ask how much they are renting for.

Check craigslist.

Also check out Zilpy.

I'm looking at two MHPs. Do you use a different method of evaluation for them? If not, these seem like incredible deals. The rent is what they are currently bringing in.

They listed much lower expenses so I used the 45% instead.

list 235k
20% down 27k
1854 monthly payment for 20 years at 6.5%
rent: 4745
expenses 45% = 2135
2610 left over

(2610*12)/235k
cap rate: 13.3%

756 monthly cash flow
9072 NOI
9072/27k
COCR: 33.6%
rent is 2% of list price


list 120k
20% down 24k
855 monthly payments for 20 years at 6.5%
rent: 3100
expenses 45%: 1395
1705 left over

(1705*12)/120k
cap rate: 17%

850 monthly cash flow
10200 NOI
10200/24k
COCR: 42.5%
rent is 2.58% of list

I realize this is already a year old, but do you still see lenders that will allow a seller carry back for 8-20 unit apartments with a loan in the $750K-$1 million range? If so, do you have any names to pass along? I am in CA, but would try contacting out of state too if they might loan here. As you have said, national lenders are very strict and I hate to give up 25% of my cash. Thanks

im looking to buy some commercial real estate,, prob gonna put down an offer really soon on a property.. what do i do to buy this property for the lowest price possible.......... Anyway to talk to Agent and split the commision with him since hes gonna make a 20-ball without doing anything,,,,,

How many park owned homes? Most successful MHP investors use a very steep discount for rents attributable to park owned homes. Keep in mind, there is a significant cost to taking out/bringing in a MH (about $3k-$4K one way).

You ideally want individual utility meters for each unit, if this isn't in place you probably want to do a feasibility study on getting it done.

Also, you really need to do a good job of due diligence on the infrastructure (i.e. water, sewer, gas, electrical, paving, etc.). Any significant need to replace/repair those is going to have a big impact.

Spex or anybody with real estate knowledge:

Suppose your a single guy with no family obligations. You can pretty much move anywhere in the US for your job. You want to build a portfolio of residential real estate, then eventually move up to commercial. Where would you start off, and why? For your choice, what are the main factors as to why this particular location to start your REI business?

Another question, which is a better idea, start buying rental properties, or buying your own home? I don't see how buying a house would be an investment if I don't plan to tap into equity. I am very serious about real estate investing in the future and plan to keep expenses real low (rooming with others, cheap car/no car payment), and save a ton of my income to start.

What can I do now to add a bit of experience to my repertoire? I am a college student now so I can't do much. What are some REI books I should read?

this looks like an awesome thread! gonna take me some time to get thru it but i wanted to post to subscribe. i'm a smaller investor (compared to what i read in OP) always excited to learn from people who have done bigger/better things.

I'd suggest finding a 2-4plex that you are confident that you could live in and manage - probably renting out to other students.

This would be a good way to get your feet wet.

You'll need to get yourself familiar with costs/time associated with repairs, get used to dealing with good and bad tenants, etc.

I really only spent the last year seriously working on my RE investments, and most of the stuff really isnt even all that complex. You just need to know your **** because there are thieves in every direction who are after your money.

Learn some basic plumbing - Knowing how to replace/repair a toilet and fix a leaky faucet are extremely simple tasks that can save you 1000s as compared to calling a random in the phone book.

Get a call list for the other electrical/hvac/whatever guys you will need. Do what you can to get on their good side, and keep getting different estimates until you find someone you think you can work with long term.

Start keeping an eye on the used appliances in your area. Rental-quality stoves and fridges can be had for <100 each, and if you go to a retail store you're looking at 300+ea. It's knowledge that will save you $ when something breaks down and you dont have much time to solve the problem.

Get acquainted with the leasing and eviction process. How easy is it to evict and be granted judgements/garnishments in your town? The answer to that question will highly effect the types of tenants you need to look for.


Just start small and be hands-on with everything. Learn all of the procedures, and once you're comfortable + profitable with your first property, move on to the next.

Is it insane to think about going directly into buying commercial properties without doing residential first?

It sounds like you might be confused on terminology.

Any building on which you are collecting rent is a commercial building even if it's a single-family home.

I think you might be confused on terminology.

You may get more push towards residential simply because there are more avenues of education available, easier financing and normally a quicker turn over.

Commercial or industrial properties use different skill sets and usually are orders of magnitude higher in purchase price. Your mistakes here can be substantial and slow to recover.

Thanks for the reply. Great information. The problem is I don't have cash available to start buying, and I am probably going to be moving after I graduate. I was thinking more on the lines of what books to buy.

Which part of the country would you guys recommend starting out at? I know that high cashflow is a big priority, as I won't be doing any flips or equity investing. Mostly buy and hold, unless I can sell to buy a bigger property. Anyone know where the best rent/home price ratio is located?

Can someone explain positive cash flow and mortgages? You can structure a mortgage longer term to get a positive cash flow or higher cash flow. What is your goal for the length of the mortgage? I have a deal for a 12k mortgage, 17% cap rate and 20 years @ 6.5% the COCR is 35%ish. By decreasing the length of the mortgage, it's still above the 25% barrier, but my NOI is lower.

I'm not too sure what you're asking here. Can you clarify?

You have to negotiate. I made a post about this a long time ago in this thread. I think its on the first couple of pages. Fool proof way to figure out the seller's bottom = low ball. If he accepts, then you haven't reached it. If he rejects, then you can start bargaining. Pretty straight forward stuff.

Doubtful. Those commercial brokers might only sell 3 or 4 properties a year. Typical commercial broker gets 3% of PP.

My overall opinion based on your post: pass on whatever deal you're looking at. If the agent is making $20k on the deal then its probably too big for a guy that doesn't know the basics of how to negotiate an RE deal. Buy something smaller and study.

To specify, non-residential commercial property.

When I do this, I'll likely have the equity to buy an "entry level" property of this type (think small retail strip center). I've also heard bad things about dealing with residential tenants, and the fact that residential tenants have many advantages in dealing with landlords. I think I'd rather be dealing with other businesses.

I know the sword of Damaclese <sp> is hanging over this business. I'm not in a rush, and at right his moment not in the position to make a move in this direction. However, if the commercial/retail business does implode, I'd want to be in position to pick up some of the pieces.

I've heard the biggest issue is finding and keeping tenants. However, once they are in place (and I don't minimze the issues with this), the properties are easier to manage than residential. The tenants handle pretty much all the work in their spaces, and the costs of the common area maintenance, insurance, and other expenses pass directly through to the tenants as part of NNN leases.

This might be arguable but it seems to me that if you assume an infinite supply of deals that somehow cost you no time to perfect, you always want to maximize your CoCR, which is your real bottom line.

The catch is there are limited good deals that a given person has access to, and it takes time to complete them (which is relevant both for utility and opportunity cost), and your money will be idle while you are looking for them (another opportunity cost).

So it just depends on how you value your time and how long the extra cash that you could have put into this deal will stay idle.

I would start off in stable blue collar towns. Properties are cheap, stable economy, lots of renters. Look for population growth that is stable with few or no dips. You don't have to go to major cities. And you're not going to be able to get bargains in cities like NY, Boston, Austin, Portland, or San Fran. Its tough to get started in cities that are 'cool'.

You can do both. I got started with a duplex. We moved into one side, fixed the other, rented it, then fixed the one we were living in. You could do that. Or you could buy a SFH cheap and fix it up. ON a personal residence you can avoid capital gains taxes, so there are some advantages to starting that way.