Building Business Credit
I just started a Real Estate company in Myrtle Beach South Carolina and was wondering if anyone had any experience on building business credit. I set up the business as an LLC and am having to personaly be liable for every account and everything I do Jointly with the business. Should I go back and set everything up as an S-Corp would that help differentiate everything?? Your advice is appreciated, thanks !!!
This is off topic, but how is land appreciating down in the myrtle beach area ... around hwy 22?
Check out this forum...it has the answers to all your questions about biz credit.
http://creditboards.com/forums/index.php?showforum=27
I may be able to help - pm me
Curt
Both of our agents are bogus ironically we were out of contract on the 16th of the month. The seller and I were supposed to sign an extension at closing per my broker (not either agent). Not even one of the agents requested an extension. Believe it or not they have both been in the business for over 10 years.
Decision Man I am being told that everything pertaining to the fees were standard. Yes the company is out of Florida.
I have found that basically the sellers owe the money out and I am guessing to a local loan shark who funded the rehab. Sad to say but I felt about the deal afterward discovering that hence understanding why their unwillingness to pay more closing fees. They are definitely in a cash crunch and I sense stress and frustration when I am in their company.
I am going to go through with the deal but only because the appraiser did a crappy job. As I said this is an urban area however within 10 miles or so the multi buildings with the same rents etc. are going from $400K + where I am paying $225K. The apprasier should have went out further. The properties that he compared them to were substandard. I intend to challenge that after closing.
14 unit building
11 - 1 BDRS @ $335
2 - 2 BDRS @ $450
1 - 1 BDR unit converted to laundry room. Will have coin operated laundry.
Current maintanance has been performed on the units and building. Each unit has been totally rehabbed.
I will receive at least $2K/month from this deal and the rents for the 1 BDRS should be at least $355. Security deposits are in place which equal 1 months rent for each unit.
In 3 years I will either sell or refi. If I refi I can get a better rate at my local bank. I have already spoken to them. They wanted 20% down to purchase so they were not an option .
The numbers sound good. a 14plex for 225k!!!
which part of the country is this?
Good Luck!
I would have the current owner either collect the rents and bring them current before closing or start the evition process. I would have this as part of the closing agreement or no deal. Three things could happen- the owner would pay the rents up or go and collect the rents - or start the evcition process and I would find other tenants.
Just my 2 Cents
Not being able to sleep is the best sign to walk away from the deal. You should be dealing with a commercial lender and not a broker to save those fees. However, all commercial deals have a prepay some arestiffer than others as most money comes from a portfolio lender who are not banks and offer great programs for SISA and full doc.
In my opinion, and forgive me for my bluntness. You have a reason which is viable to walk away. BAsed on your post, She materially mis-stated income on the property, that you were relying upon to make your decisions. That is a "Material Mis-representation!"
However, there is a way to salvage this issue and potentially come out of this smelling like a rose.
First, you will have to over-come the fire marshall and insurance companies cert. if that is no go, then this deal would be dead!
Go and calmly talk to the Seller and have a "heart to heart" with her. Inform her that if the banks knew that these issues were active; (ie the rent misrepresentations, the damage to the property )
That the bank would back down, almost immediatly.
Explain that since she violated the trust of the contracts, whereby she was in custody and had to perform normal administrative and maintenance on the property, as not to devalue it; and by not collecting past due rents, is a part of that trust.
Explain that you are worried that there are other issues that have not been disclosed, and this is the time for her to do so, before anything further occurs.
Take notes! Put your heads together on finding not only problems, but solutions and compromises to those problems.
Here is what you can obtain from this:
One: You could get her to carry back a note, for the balance of the purchase, at a drastically reduced price to compensate for repairs. also include an interest only clause in the payments, with a balloon at the end. this will cut your monthly payments as well as a low percentage rate..
Two: YOu can walk away with more cash than what is in escrows already, to do the repairs and cure the actuall losses of acquiring this property.
Three: She can sell that note at a discount and get what she needs, out from the sale. Set the sale date a year away, and then hit her with a "Lease/Purchase" agreement.
Four: That is right! A Lease/Purchase agreement for one year. You explain this by telling her that again, mrs seller. there are issues that already have came up which shakes your confidence in the sale. This year, lease/purchase is to weed out further problems, if they exist, and get them fixed.
In some states, she is committing fraud, by mis-represneting her earnings on this property. Tell her that the price will be fixed for purchase, and your lease payments will go to the down payment of the property.
Here is the reasoning for all of this:
First: It allows you to fix issues, while building up reserves for closing the transaction, without any more consessions.
Second: It allows you to walk away, should this be a lost cause. without losing anything.
Third, you still generate the revenue for one year!
Fourth: It directly ties her to help out with repairs of the facilities, and the costs of those facilities.
Fifth: It allows you to cure the issue with the insurance agency when it comes to repairing that joist.
Sixth, it gives you seasoning, on your note to her so that she can get a higher price when selling it at discount.
Seventh: It builds in protections from losing a potentailly good deal, which has otherwise turned out to be a negative situation.
Lastly, it gives you control of the property which will allow you to offset current market value against potentially higher market values of next year for that property; once it is cleaned up. And you have a "built in Back Door"
Hope this gives you some ideas
Just my 2 cents, but for an urban area $2k a month seems light for 14 units. The rehab will help, urban areas usually have a lot of management i.e. late pays, move outs.
I could potentially work with you on this project but I do have a few questions.
Do you have any experience developing condos?
Where are you getting your construction costs from.?
Have you taken into account financing costs, or do you have a more detailed cost breakdown? Why is the property so cheap right now?
Thanks,
Interesting, I how do you make the numbers work on a duplex in this price range with the high property taxes and modest rents in that area? Is this based on an interest only loan, or is there something special about the units that command a premium rent or are theese four-plexes? What are the assumptions you are using for operating income and expenses?[ Edited by finniganps on Date 05/22/2006 ]
These are middle-class duplexes in great neighborhoods with some room for improvement. $60k down. $240k financed. Rents are approx $1000 (modest) per unit. Mortgage @ 7% $1,596. Cash flow approx $500, even higher with improvement.
Given that they are in middle class nieghborhoods surrounded by snigle family home, the attracted great/low maintenance renters. They are all occupied currently and have been so for years.
I am also in California and have been looking to purchase in other states.
I have looked into Texas, and plan om buying a new build condo in downtown Austin.
It seems to me that you are paying too much for these duplexes.
I have duplexes for 125K up to 150K.
Have you seen the MLS for yourself?
You can go to ****This URL Not allowed**** online and look up prices in the area.
Or go to ziprealty...it seems to me that this agent is leading you to the high end stuff.
Look into it before you buy.
I asked a question about that loan yesterday and I see it was deleted. Are questions about where to get good financing prohibited on this site?
Chris
Quote:
On 2006-05-26 00:15, ypochris wrote:
I asked a question about that loan yesterday and I see it was deleted. Are questions about where to get good financing prohibited on this site?
Chris
Did you say anything that was neutral about this site in your posting? I had a posting deleted last week after I suggested alternatives to this websites ppy listings for rentals. I guess the mods can be touchy. Still a great site!
I just asked where she got it, period.
HOwdy,
This is my first post to this group, bu tI have done over 60 options in the past. Make sure that your option and lease are seperated in contract form. The courts make look at the option as a lease only...if you combine them. As mentioned you had best check with your county planning dept. before you move forward at all and make sure they will rezone (if needed) the property first. A typical depsoit on the option is usually 5-7% down. You need to come up with an amount for monthly option consideration based on the monthly lease amount. Example: if your lease is for $5000.00 mo. then your option consideration could be around $1000 or 15-20%. Most options can be based on 1-3 years with an additonal renewal of 1 year. But that can always be negotiated as well. Good luck, I would love to hear more about what your plans and costs are with this project. I know of someone that took an old high school and turned it into condos/apartments. Made a bundle!
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