My Plan, Stupid? Possible?
Iv been trying to learn as much as possible in the past few months...about real estate...and will continue to do so until i die
my problem is, starting off small...it doesnt really fit my personality....i want to go for it, dive in head first
im only 20 years old, no money, no job(recovering from surgery) im very smart, and highly motivated
i want to get a property, my first one...commercial maybe 50+ units
i want to make millions and wont be able to do it until the properties i am acquiring are worth atleast 2-3 mill
my plan, without any money...would be to have the seller ONLY sell me the building, and hold his land instead of the down payment, in which i will lease to buy from him
he will gain appreciation in the land as well as getting paid monthly
i could take out a loan for whatever has been paid off and entice the lender to give me the loan by offering him interest on a higher loan then they would actually give me
example. Property ----1,000,000
exhisting loan balance --750,000
i could take out a 250,000 loan and pay the mortgage company an extra 4% or so to make the payment on the first mortgage for me as i would give them enough money each month for both loans, and interest on each for new lender...
they would be making interest on a $1 million dollar loan, with parting only with 250,000...im sure the higher officers of the company would be excited about this oppurtunity
paying a management company wouldnt be a problem, and id make sure every decision involved me...even if it wasnt for my input...so i could retain the decisions made by experienced property management companies...
so how could i really mess up? is there any reason a lender wouldnt go for it?
now, my question, do yo think this is STUPID or somewhat promising?
im going to go for it anyway, iv got nothing to lose...but i would appreciate input
~Andrew
high hopes will put you in bankruptcy.
what lender or owner will float those kind of funds?
starting off small is the only way to become big. steady income is the key. do you have any source of income when a tenant does not pay, or when there is vacancy?. the owner or lender will only be interested in one thing - can you pay?. until you can answer that question - good luck.
well taking over an already, fully occupied building would provide the cash flow needed...
if all that would change, is building ownership...nothing concerning tenant managing would be disrupted as long as a clear cut, profit earning path has already been established
with a building of 50+ units, 1 vacancy wouldnt do much damage as ofcoarse the vacancy would be filled immediately...
with a full buiilding and, a mortgage on a building worth much more than the amount being borrowed, why wouldnt a lender WANT to make such a loan?
Don't take Steves negative thinking too seriously. 35 to 50 unit buildings are actually a nice niche--to big for the average weekend warrior to be interested to small for the well-capitalized to chase.
Now, turning to the idea of lease-optioning such buildings. It might work but to get an interested seller you are going to have to find somebody whose tired of managing the property and who has a property that they cannot, for some reason or another just turn over to a management company. That probably means looking at blighted neighborhoods. Such properties are difficult to manage but there is money to be made there. You are looking for property that has been neglected for some years but which doesn't need too much fix up to be viable. If you can find such a piece near a gentrifying area that will be all the better in the long run.
Steve's start small advice is not bad but the reality is that very few people who start buying and fixing single families ever build up to the place where they are doing apartments. Part of the reason is that these two market segments are so different that it is hard to make the switch. If you are sure you want to be in bigger properties then start there-- don't plan on building to there.
That said the real basic question is what are you going to do in these properties to add value? Worrying about how to structure the deal is pointless until you have figured out how to either buy at 70% of value (very hard to do in the commercial business) or add value for another 30% of your acquisition cost.
well wouldnt the answer to your question lie in what you said, about finding a property with a tired landlord, a little run down but 'doesnt need much work to be viable'...?
thats what ill start looking for, ill have to leverage some people, including a realtor, i dont think i would find what im looking for so easily without one
do you think there is any way i could market, my wanting for such a building? do you think an ad in the newpaper would work?
thanks for your reply, i know to get big, i need to start somewhere bigger than small
~Andrew
I would think that most large complex landlords had at least started with a few SFHs or at least a four plex or so. Yes, they're different, but unless you come from a family of REI I would imagine it would be a bit tough credit and knowledge-wise to jump right into 50+ units.
Also, young, you said a 50 unit building only having one vacancy and it filling quickly. This definatly is affected by the market, like anything else. In my area rentals are available everywhere because of the amount of people purchasing homes, therefore all multiunits are offering 1 or 2 months free for new tenants. If 20 units are filled using that method and you gave out 20-40 months free, thats like another 2-4 vacancies for the year.
I guess I would at least recommend doing a few deals to get the knowledge of real estate. There are many things that reading the forums can't do for you.
Quote:
On 2004-12-25 10:10, commercialking wrote:
Don't take Steves negative thinking too seriously. 35 to 50 unit buildings are actually a nice niche--to big for the average weekend warrior to be interested to small for the well-capitalized to chase.
Now, turning to the idea of lease-optioning such buildings. It might work but to get an interested seller you are going to have to find somebody whose tired of managing the property and who has a property that they cannot, for some reason or another just turn over to a management company. That probably means looking at blighted neighborhoods. Such properties are difficult to manage but there is money to be made there. You are looking for property that has been neglected for some years but which doesn't need too much fix up to be viable. If you can find such a piece near a gentrifying area that will be all the better in the long run.
Steve's start small advice is not bad but the reality is that very few people who start buying and fixing single families ever build up to the place where they are doing apartments. Part of the reason is that these two market segments are so different that it is hard to make the switch. If you are sure you want to be in bigger properties then start there-- don't plan on building to there.
That said the real basic question is what are you going to do in these properties to add value? Worrying about how to structure the deal is pointless until you have figured out how to either buy at 70% of value (very hard to do in the commercial business) or add value for another 30% of your acquisition cost.
Hey young,ya got the right idea with larger units-In my opinion. Why waste time with single-family---go for the larger units right off. Just do it conservatlively and educated. I found one -where the owners health was bad and wanted to retire. They were willing to write the note @10%.dn.. Problem were the other partners wanting cash now-Point is-Decent deals are out there. One vacancy doesn't break the bank on payments either. A $20.00 increase in rents calculates to a decent profit as well. Thats why, That all I will look at. I just can't see taking the risk with only one house at a time- 3-4 months of eviction can ruin your credit
I recall you were the one who posted about reading the TRUMP "book how to get rich" yes that book motivates you but it doesnt give you the knowledge that he has.
bare in mind Trump started out working for his father who was a major developer in low income housing. he started by collecting rent from his fathers buildings. and worked his way into manhatten.
get some experience working for a property managment company, developer, major contractor or a commercial realtor. then go for it.
knowledge is power, ignorance wil get you no where.
Things must be VERY different here in California....
I too would love to own a 50 unit complex, but for someone like me who works full time and was not born with a silver spoon, I have to buy what I can afford.
I started out renting out my first home, then bought two other rental homes and then a triplex.
Is it really that easy to buy a 30-50 unit property with nothing more than a burning desire?
Boy...where did I go wrong??
Well getting a job with a preperty management company has been a goal of mine, although doing some cold calling i realized its not going to be easy.
also, i have money, im not just going on a burning desire, im not a fool....i came into a large amount...im ready to play
also, i did not read donald trumps book and realize i was going to dso something...actually, i read his book and wanted to throw it in the garbage...it said nothing
im just looking for an opinions, my special situation is im an intelligent, and motivated person comming into anywhere from 300-600k....i have what i need to take the steps...im just trying to get opinions on ideas...thats all
i HIGHLY appreciate everyone who lent their opinion...thank you
Right....
That is where I am at right now....I have these properties that have appreciated up to this point, but there is no cash flow.
I wanted to continue buying and hold these properties for another three years or so, getting to a place where I could sell half of the properties and pay off the other half...but the lenders are giving me stated loan rates which will not allow me to buy without a large negative.
So I am stuck...I can either sell and exchange or continue to hold and wait for the next upswing.
If I do exchange, I am seriously thinking about Texas.
Cap rates for multi family in LA are running in the 3-4% range to me that is too agressive. Alot of CA investors are buying in TX and Tech Valley, NY (Albany Troy) Cap rates are in the 8.5 range with steady 11-15% annual appreciation. Although I see that hitting a wall soon.
being from Michigan I would like to just add you are seeing alot of high level investors starting to poor money into this market although I personally think it is a year too soon with the job losses coming from the auto industry you are going to see alot of home owners become renters.
I predict a big occupancy increase in pockets here in MI for 07.
I bought a 148 unit mobile home park in Flint. it is in bad shape with real high vacancy I got it for about $3500 per pad.
in two years it is going to be worth 10 k per pad. it cash flows well enough to support its own debts. there are alot of proepries like that out hear.
Is there a way to get into mobile home parks on a smaller level? For those of us who can not come up with a half a million for 148 pads.
Do you have any recommendations for 100% lenders?
Also, there are still a few foreclosures on the market - they are just priced a bit higher. Still a good deal at $115,000 in my opinion though if the possible resale is $150ish
I have a list of 100% lenders in my office and some of their closing costs. If you want to give me a call Monday my cell is 619.246.0731 or check my profile for my email addy.
Lots of time the best way to find these homes are before they get to the bank. Once these homes are at the bank everyone is biding on them.
What about vacant props? No one seems to look at them. I just but some of those. Did a little rehab and have a nice house.
[addsig]