I Find The GREAT Deals , But I Can Not MAKE $$$
I am a new commercial investor, and find the great deals , but because of my financing situation I can not capitalize on these deals. I need advise!!
For example I have a 27 unit complex under contract in the Southern California area that is 650k below the fmv. Accually the appraisal would come in at about 1mil above my purchase price. I also have a 10 unit building in a growing area of LA under contract for 65% of the value.
If any one has any ideas, suggestions, of contacts who may be of assistance please let me know.[ Edited by mrglobal on Date 11/12/2004 ]
On the one hand, Global, its always easy to find great deals when you don't have cash to buy. This is because those great deals are not really as great as you think. There is nothing like the prospect of having a lot of cash on the line to make you find the "holes" in a deal.
. However we don't really know how you got to the FMV. Is this based on a cap rate? If so how good is your financial analysis? Is it based on comparables? If so how good are your comparables. Clearly my own "guestimate" of $100,000 per unit value is blowing smoke (5 minutes research here). I'd like to know that your analysis is a lot more sophisticated than mine before I bought the property, or bought in as your partner.
Lets take your 27 unit as an example. Assuming an approximate cost per unit of $100,000 that makes this a $2.7 million deal and your $650K discount approximatly equal to 24%. Thats a very good deal (even on the borderline of "great"
Now 65% of value is a great deal. But before I send you a check I'd need to know that you actually understand the value, that you've done the due diligence, so to speak.
On the other hand perhaps these deals are as good as you say. In that case then what you are looking for is a money partner. Money partners are not all that easy to find. But they are not all that difficult either. Start out with mortgage brokers who specialize in commercial loans. All mortgage brokers will tell you they can finance everything. Do not believe them. Ask whether the bulk of their business is SFR's or investment properties. Walk from the SFR guys. Ask if they have a private investor who will finance properties based on their Value rather than cost. Accountants and Attorneys are also good conduits to clients who have big bucks to invest. However they are rightly concerned that the thing won't blow up and leave them with egg on their face for recommending you.
The traditional wisdom is to put ads in the paper looking for investors, I've never found that to work very well.
Thanks for the informaiton. I have doen some due diligence on the property that I spoke of. I have all the numbers and it makes it a great deal. GOI of 20k per month etc. I will talk to a couple of people I know in the commercial lending business. The people who I have spoken with do agree that the deals make dollars, and they al so make good sense. I will try to find a money partner.