Just wondering

[Firstbase]

I have a question regarding major rehab projects. Dealing with hard money lenders everything is all about L.T.V. I never thought of applying that same rule to large income producing properties like lets say a 50+ unit vacant apt. bld. Due to the size of the deal would you go about things as you would a s.f.h.? Could you structure a no money down deal if you can keep complete cost at 65% L.T.V. or lower or is it a totally new game with new rules When you venture into the world of 5+ units(commercial)???

[Jim Johnson]

First- all the rules change with multi family. That said, the lenders will adjust current loans based on market conditions if you know how to negotiate with them. There are also some really great rehab products out of FHA that will loan the current basis and the fix up costs on a draw. Then convert to a full payment loan once the fix up is complete. The downside is... it take a good bit of time to get these projects to go through. I would recommend to purchase the property on a lease option... give yourself a couple of years and them a couple year extension to get the property up and running. Then... sell the option or purchase the property at the discount your option price has determined.

I have a question regarding major rehab projects. Dealing with hard money lenders everything is all about L.T.V. I never thought of applying that same rule to large income producing properties like lets say a 50+ unit vacant apt. bld. Due to the size of the deal would you go about things as you would a s.f.h.? Could you structure a no money down deal if you can keep complete cost at 65% L.T.V. or lower or is it a totally new game with new rules When you venture into the world of 5+ units(commercial)???

[Firstbase]

Thanks alot. Well put. It did cross my mind as to how to get such a property to run smooth and all I could come up with was a really good management company to join on early in the process. I was basically concerned with how to get hands on the property. I was of the mind that it should be some major profits to be made if an income producing property is vacant and need to be brought up to standards to produce that income. Since the price of the property is based on the income it produces a big dicount should be in the picture. Does that make sense or am I thinking below 5+ units again?

[Jim Johnson]

The challenge with larger units is... well... they sometimes seem overwhelming! The good news is... they are overwhelming to most investors. Here is a good rule of thumb... the larger the property... the fewer players. So I tend to look for BIG deals. Big dogs with lots of fleas. The average investor walks away because it looks so hard... truth be told... it all works the same... only the decimal point changes. Larger projects are owned by more savvy investors... so things like long term lease/options are real options to them. If your going to pass on a deal make it be a bad deal... not a big one. There is huge money in a lease/option then assignment of the option or a purchase on the other end. It is a long story but I am working on a 25 year lease/option on a mobile home park right now. They want income and no capital gains or recapture tax. Think of this... My option price could be $100 at the end of the term. Or... it might be fair market value in today's market. The park is 50% full. Once full, after debt service (lease) it will cash flow about $12,000 per month. The option I am putting down is $20,000. I will also own the paper on the mobile homes which will cash on cash return about 75% with a 800% cap- another $30,000 a month. They continue to make a good return on their investment... and I get to make a good return on mine. Either way... we both get what we want! Try asking the owner to owner finance the property, or lease option it, or if they are loosing money... ask them to give it to you for a return down the road. Just put on your thinking cap and go for the good deals!

Thanks alot. Well put. It did cross my mind as to how to get such a property to run smooth and all I could come up with was a really good management company to join on early in the process. I was basically concerned with how to get hands on the property. I was of the mind that it should be some major profits to be made if an income producing property is vacant and need to be brought up to standards to produce that income. Since the price of the property is based on the income it produces a big dicount should be in the picture. Does that make sense or am I thinking below 5+ units again?

[Firstbase]

Enough said! Thanks alot. I'm going to do alot of research and jump in.