Archive for May, 2008

And I’m STILL waiting for the seller’s 2007 tax returns.

In the mean time, I’ve been working on getting my financing squared away. What a nightmare this is turning into.

Before I even finished negotiating the PA I interviewed six mortgage brokers and called around and talked to a couple of others. I settled on two, and began the process of getting a hold of the elusive “Commitment Letter”.

Now from my residential experience this seems like it should be no big deal, right? Wrong! This has actually been the most difficult and time consuming part of the process. Everyone that I presented this deal to told me that it was golden – a solid building with no deferred maintenance, good rental area NOT in the city of Detroit, strong rental history, and excellent debt coverage ratios. I have a ton of experience with rental properties, great credit and cash reserves, so this should have been the proverbial slam dunk.

Exactly what I was looking for in my first building. A slam dunk. Not only that, a slam dunk with upside potential.

But alas, this is Michigan. Land of the subprime meltdown, 50,000 foreclosures, and a do-nothing, know-nothing government.

So right when I was about to get my “get out of jail free” card in the form of a commitment letter, the rules changed. Fannie Mae (see my related post here http://dennisfassett.com/2008/05/09/too-little-too-late-a-friday-afternoon-rant/) decided in their infinite wisdom to downgrade Michigan to it’s third tier of risk. I know now that this is a “bad” thing.

And just like that – no more 80% LTV loans for commercial properties in Michigan. Brilliant. And again, too little, too late. This was two weeks ago.

Now my intrepid team of competing commercial mortgage brokers tell me – No Problem! – a 75% LTV is a slam dunk. 

And still I wait. Is there a Commitment Letter in my future? At his point I think that only God knows. Only time will tell.

Stay tuned for The Building – Part III: The Inspection. You won’t want to miss it.

Simple and profound. Go figure . . . . . 

I know that this post is long overdue. As the next step in my Apartment Quest series I’ll tell you about the building that I’ve been “buying” since the middle of April. I had heard that this was a long process, and I had heard that it was filled with capital “D” Drama, and so far the experience and process has lived up to it’s billing.

I finally hooked up with a great commercial real estate broker (more on this later). We settled on one building in particular that looked like a good prospect for a first buy. It was all brick, had a pitched roof, heat and electric were separately billed, and it had a “helper” on site who would show apartments. And it was priced decent at the list price.

We danced a bit on the Letter of Intent, came to terms, then spent ten days hammering out a full purchase agreement. The amazing thing was that this PA was shorter than the single family residential version that I use, because a lot of the disclosures that are required in residential real estate are not in commercial. This is probably because most of the people playing in the commercial game are big boys and girls not prone to blaming others for their mistakes or seeking help from the government when they sign something that they either don’t understand or haven’t read.

Case in point – there is no “right of rescission” in commercial real estate like there is in residential. Nope – when you buy it, you buy it.

Anyway, once we had the PA signed the due diligence period started. Again, my commercial broker out-did himself and had the three-inch high stack of documents put together in a couple of short days. I had always heard that ALL sellers of commercial property lied about their buildings, so I was prepared to dig and claw to get to the truth.

What I came to find out though, was that one of the items that’s required in order to get commercial financing was tax returns. Not only mine, but the seller’s as well for the last three years. Now I’ve been a finance guy for 20 years, and I now that the “tax books” that every company keeps represent the worst case scenario, because companies always strive to minimize their tax liability (within the limits of the law, of course) by minimizing revenue and maximizing expenses. So I was very interested to see if what the seller had said in his listing matched the actual numbers that he had submitted to the IRS.

To my shock – they matched pretty much exactly. In addition, all the supporting information matched as well, rent receipts, tax bills, insurance bills, utilities, repairs, everything. Everything except the his 2007 tax returns. Which I’m still waiting for. And waiting. And waiting. And waiting.

Check back in a couple of days for the next installment: “The Building – Part II”

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To hear the replay dial:
Tel: (641) 715-3508
Code: 237869#
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Are you satisfied with the returns in your retirement accounts or other investment accounts?

Would 8-12% returns, fixed and secured, make a difference?

If that got your attention then we can work together.

You see, the real estate market here in the Detroit Suburbs continues to be the hottest investment real estate market in the country. I closed on and rented my 8th single family rental property in February, and I’m in the process of buying two apartment buildings.

But I just can’t stay away from these single family homes! The buys are just TOO good. Here’s the latest that I’m in the process of buying. It’s rental #9.

City: Harper Woods, Michigan. It’s a 3 bedroom, 1.5 bath all brick home in the best school district in the state – Grosse Pointe. It has an updated kitchen and bath, a full finished basement, and includes new appliances including a washer and dryer. The best part? It needs literally zero rehab and it can be rented the day I close.

Actually the best part is really the price – $69,250 (the comps are at $124,500). And it will rent for $1100 per month. Not too bad.

Do you know how I’m financing it? A private investor. Someone much like you that’s looking for something a lot better, more consistent, and with a lot less risk than the stock market.

There’s another one on the same street that I’m looking at. It’s a little nicer on a bigger lot, but it’s selling for the same price. And I need another private investor to finance it.

And there are more after that that I’d like to buy. In the same price range. In the same condition. At the same discount from the comps.

But I need short-term financing – and you need higher returns. So you owe it to yourself to attend my free teleconference on Private Investing and learn how to take control of your retirement account returns.

The teleseminar will be short – it’ll run only about 35-40 minutes. Just enough for me to cover the following topics:

1. What is private investing?
2. How does it work?
3. How is your investment secured?
4. How is your investment protected?
5. What kind of returns can you expect?
6. Who am I and why am I doing this?

And I’m offering a Free Bonus to those that attend it’s a Free CD titled “How to Create a Tax Free Income for Life”, which will show you how to unlock the power of your retirement accounts through investing them in something other than the stock market.

By the way – I have nothing to sell and there isn’t anything to buy on this call. It’s simply solid information that you can put to use immediately.

And true I have to admit. I still want one though!