Am I going to be laughed out of every bank I walk in to?
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[{"id": "ftpbx4y", "text": "Tax appraisal doesn't mean much. In a deal like this they're not so much looking at the borrower as they are looking at the asset value. LTV will be critical. They will have you pay for an appraisal. Have you talked to any commercial RE brokers to get an idea of value?", "replies": [], "depth": 1}, {"id": "ftpc8m7", "text": "Normally-2 year record of sustained reported income(IRS).  Gift from your mother. Even hard money lender expects you to foot 20% down and their name in 1st place on the deed.", "replies": [], "depth": 1}, {"id": "ftpcpez", "text": "You've obviously put some serious consideration into the changes you'd like to implement, is there a way you can get your relatives on board with both the changes, and your managing their implementation?\n\nIf you can arrange a deal where the relatives essentially become 'silent partners' to your 'general partner', where you're doing the management of the property, you have something a lot of folks work really hard to find, which is partners to share the financial risks. \n\nWhy not let the relatives bear their own share of the risk, and figure out a deal where you see a higher share of any potential gains that you're doing the management and implementation of?\n\nI completely understand if part of your drive to buy folks out is wanting to reap 100% of any financial gains as a result of your ideas and your work. I would counter that with the fact that leveraging the equity you own into a WHOLE LOTTA debt may be putting all your eggs in one basket.\n\nI'm 36, with 12 years experience in leadership and management, mostly related to operations and logistics. I still have had to learn a lot in the 2 years I've been managing residential property, and some of those lessons haven't come cheaply.\n\nIt sounds like you're smart, driven, and capable... but there are a lot of intangible lessons that can be learned with age and experience. A lot of lessons that can be very expensive to learn under high stakes.", "replies": [], "depth": 1}, {"id": "ftpj37p", "text": "Why not do a cash out refi and buy another asset with while you and your relatives stay in the original property? You can still increase rents and improve the original but if they've owned it for years there should be significant equity to unlock and you could use the proceeds to compound your investment.", "replies": [{"id": "fukup1r", "text": "My guess is the relatives owning the other 75% want their money and not have it tied up in an under performing property, and the money will probably be tax free due to the inheritance part.", "replies": [], "depth": 2}], "depth": 1}, {"id": "ftpjc08", "text": "25% is often not enough equity for a retail strip, you will likely need 30% plus. Why do you need to buy our your relatives right this second? Do it down the road? Also there are major structural issues with retail right now, so it would easily be possible to lose money with a highly leveraged retail center if you start having periods with no rent (kicking out low paying tenants to try to get higher paying ones creating temp vacancy, tenants unwilling or unable to pay rent due to covid or bad economy, or retailers declaring bankruptcy).\n\nAlso a bank may not lend to you since you have almost no real estate experience. Unlike other kinds of debt like a cc or home loan, for a commercial loan, relationship with the bank, experience and track record do come into play.\n\nAlso consider that to replace a retail tenant you may have to spend a lot of money in commissions, abatement, and tenant improvement allowances.\n\nTo summarize, even if you could get the loan, you are taking a lot of risk without a lot of experience. Adding debt increases risk even further.", "replies": [], "depth": 1}, {"id": "ftpo1cv", "text": "I had a 17% stake in my families business. Asked the remaining family to owner finance their shares to me. Then I used the real estate as collateral to buy ANOTHER business. It\u2019s not impossible. I used a bank out of state after my local banks told me \u201cit just didn\u2019t add up\u201d. I\u2019m doing very well despite the local banks opinion. Keep knocking on doors. Eventually one will open for you.", "replies": [], "depth": 1}, {"id": "ftpr961", "text": "I would go through the process of marketing and selling the property and wait until you see offers coming in... either 1 - someone will come along and offer close to appraised value and then you can offer your competing buyout bid; 2 - market is softer than you expect and offers come in lower, in which case your buyout bid becomes more attractive and gives you leverage to possibly secure a VTB; or 3 - buyers are more bullish than you anticipated and offers come in higher than appraised value, in which case you might reconsider your willingness to compete and buy out family members or just cash out.", "replies": [], "depth": 1}, {"id": "ftpuzui", "text": "You\u2019re going to pay a pretty high interest and receive a 50-60% LTV in this market probably.\n\nIf possible and you are on good terms with your relatives, I would try working out a preferred equity type deal with your aunt/uncle, where they sell you their 75% stake in exchange for preferred equity where you pay them back with interest/dividends over time. Still go through the normal process with lawyers so it is as official as possible and they can\u2019t backtrack on it in the future.", "replies": [], "depth": 1}, {"id": "ftq42e2", "text": "Forget everyone telling you that you can\u2019t do this. You can. Do it and then grow it. \n\nI\u2019ll keep this brief as I have a call coming up. You probably don\u2019t know much about retail and in the current environment lenders are risk off on retail. They won\u2019t loan past 65% on good quality centers. \n\nSo, I suggest you get a partner to go in with you. Someone who can show you the ropes. Find the best retail sales / leasing broker in the neighborhood. Have a biz plan ready and pitch it. Ask them if they want to partner or know someone who will. Tell them you need someone to guarantee the debt (or at least the carve outs). You need to maintain control, so have a good OA.", "replies": [], "depth": 1}, {"id": "ftqtsj0", "text": "Seems like you are focused on them underwriting you and not the property.  \n\nMy thoughts:\n1) get a reputable property manager. Take yourself out of the equation.\n2) lockbox the rents so the bank gets paid first.\n3) I understand you want to buy out your family, but see if they will do a limited guaranty for the first 2 years for the \u201ctransition\u201d.\n4) do a deep dive on the tenants. Get the aging receivables. Request their financials. They need to be solid.\n5) run the numbers once you have #1 and #4.", "replies": [], "depth": 1}, {"id": "ftr1cwa", "text": "Now is a risky time to make a big purchase like this on commercial property - esp a strip mall. I would hold the 25%, take the income, save it, and see what happens in the next few years. It could fall and you could end up grabbing it for cheaper if your relatives want to get out.", "replies": [], "depth": 1}, {"id": "fukv0zk", "text": "I am really interested to see what the appraisal assumptions are going to be for stabilization. We have not ordered an appraisal in three months since early February, and the one we received in late February had a COVID disclaimer, but the absorption rates were unchanged.  \n\nAlso do not be surprised if the appraisal says $X Million and once the property is in the market, the only offers will come in 20%+ lower than the appraisal. We just had someone offer 65% of a February appraised property that is in our special assets Dept.", "replies": [], "depth": 1}, {"id": "fv56oy8", "text": "Dude just let the property get sold and take the cash and put it into a retirement account for yourself. That's the best thing you can do. \n\nYou have no idea how to manage the property and you have zero cash to fall back on when capital improvements need to be made the all the holdings. Your grandparents do not have a huge holding but its more than what 99% of people have so count your blessings. Yeah, you could easily purchase this and it could go smoothly but odds are if you're asking how to handle this on reddit it's going to be an ultimate disaster that'll cost you so much more than you're ever expecting. You didn't make that money to buy those properties, your family did, and you have so much more to learn before you're in a position to own, manage, and hold something like this and come out ahead. \n\nYou have a 25% stake for a reason. I'm not even sure why you have that much skin in the game but everyone's different. Let it go, go make your own money, and in 30 years maybe you can buy your own multi tenant retail center.\n\nYes lenders are going to laugh you out of the office. You're young, dumb, AND BROKE. \n\nWho the fuck do you think you are kid? Grow up and realize you have a nice cushion of cash waiting for you at a stepped up basis when your family liquidates these holdings and you can blow that on whatever you wish.", "replies": [], "depth": 1}]