Is it better to buy and hold or buy and flip real estate

I know there are many different factors with this question, but I just looked current values on a bunch of properties that i have sold over the years and in every case, they were much higher and I would have been better off  keeping them...... Something to think about

“In Real Estate, It’s always about the buy, and the hunt is the first step”

Written by H. Jack Miller

While everyone has different ways to get “The deal,” I have never been successful following the traditional means.  I find that if a property is listed with a realtor and it’s out there on the open market, chances are it’s not a deal for me.  By the time I see it, all the insiders have seen and passed on it or bid the price up and everyone and their mother has seen the property.  Even worse is an auction or the somewhat new “call to offers date.”  With this it becomes a feeding frenzy always bidding the price up.  I cannot compete with everyone else in town, and on commercial deals, it’s out of town competition as well.  They always have more money and are more anxious than me.  My goal is to see the deal before anyone else does and have little competition.  There are many ways to do this, but here are a few ways I have done this in the past successfully.  

I try to make a few strategic realtors my advocate.  Every guy out there has less than a handful of his/her guys, people who he has a close relationship with, who have proven themselves in the past as those with whom he can make money.  I try to buddy up with the players in the marketplace and cultivate the relationship.  They know who I am, and I know who they are.  I want to be the guy they are thinking who will buy this when they are talking to the seller about it. I let them know that I will pay their fee or a buyer’s commission for off market deals.  After all, what’s the difference who is writing the check?  In most cases, it’s packed into the purchase price anyway, and I will be paying it directly or indirectly.  I have found some great deals this way and I have been first to look and deal with the seller.

Another way that I love is to offer to make the realtor your partner.  This accomplishes a few things.  You get to see the deals first, and if they are your partner, they will do a lot of the day-to-day leasing and other work for you.  Be cautioned, however, because in my experience, most realtors make lousy partners and I do not believe they know what they are talking about.  All you want is to see the deal first.  Anything else will be a plus.  This takes me to a whole other area about partnerships, which I talk about later, but for this case, it’s best to let them put their commission on the line and invest it in the deal.  Depending on the food chain, this could be a sizeable portion of the equity money you need for the deal.  Of course, if they have money which they will bring from home, that’s better yet, but that has never happened for me.  Most of the time, in the end the realtor does not want to let his commission ride; he needs it to eat.  Depending on how good of a deal it is, you can put the realtor in for some percent of the ownership which you end up with. I do have one other rule for realtors who are partners.  I make them sign on the mortgage and note with me.  I do not mind being on the firing line, but in this case, I want to celebrate or cry with the realtor.  I generally do not ask my equity partners to sign personally because I want to take all of the arrows for them.  I also want to let you know that my experience has been that a realtor always loves the deal.  By their very nature, they are salespeople, and generally have little to lose, only see the upside and do not fully understand the downside or risks involved.

I have also lucked out here and there by finding a residential realtor who had listed a commercial property listed. In these cases, the realtor is usually a friend or relative of the owner and the owner trusts him.  However, you can get lucky because the realtor has no clue as to the real value.

Of course, it’s always great to have an inside track with a lender who will call you first.  You achieve this by reaching out and letting them know you’re in the marketplace, obtaining their respect and proving that you can deliver.  This is not achieved on day one, but rather, after many years of working with someone.

I already said that I hate auctions and bidding wars and almost never participate in them, but there was one in which I did, and it was a grand slam home run for us.  I mean, we hit the ball right out of the park.  There was a trust that owned some commercial properties and a few residential properties that it needed to sell.  We got word of it from the inside and it was being handled by the bank who was the trustee and a local law firm.  We looked at the situation and realized it was a real mess.  There were options given, someone had the first right of refusal, others had long term leases and conflicting leases as well as arguing among the children of the estate.  In addition, there was cause for concern about environmental issues that could be involved.  However, the property was a class C property in an A location.  So, we made our offer with a price we could justify with only two contingencies.  The first was clear title, and the second was a clean environmental report.  The key was no financing or other contingencies.  We also said that once accepted and out of due diligence, we would put down a very large deposit to be held in escrow.  In fact, it was eye popping considering the sales price.  By the way, while we thought our price was good, we knew the children were happy with it. But thought there would be some competition. We did a lot of work behind the scenes to convince the interested parties that we could deliver what we said we would, when we said we would, and stressed the fact that since the deal was so complicated; many would not persevere through the nonsense to a closing.  Further, if there was a large public auction, it would take a lot longer to advertise and sell the property.  We made our offer so that even if there was a high-priced offer, they would have to give it to us because it was so clean and simple.  In the end, after about a year, we got the property, and like I said, hit it out of the box with this one.

There was another case where a competing investor told me about a deal that he had passed on because it was a land lease.  That did not make sense to me.  I looked into it, found out he was not correct, and in the end purchased the property

There are so many stories similar to the auction story, but the moral of the story is to do your homework, strategize and look deep into the deal.

As I look back, it seems that there is always a twist, or you need to wrestle the property from the seller.  I cannot think of a time when the property was listed and we purchased it.  The really great deals always have a story and you have to battle to get them.  Sometimes at closing, it actually feels like giving birth.  Likewise, the more obstacles there are, the more opportunity there is for you.

In the end, no matter how you find the really great deals, it’s always about the buy.  There will be many things that go wrong, but a great buy price will make the mistakes worthwhile.

  

Written in November of 2011 by Jack Miller, no part of this maybe copied or reproduced without the express written permission of the author. Jack Miller can be reached at JackMiller@GFCIB.COM

Two new clients using our Financial Restructuring and bankruptcy Support services

November 22, 2013

For Immediate Release:

Huntingdon Valley, PA./Fort Lauderdale, FL.

GFCIB and Advisors, LLC a nationally recognized financial real estate advocate and advisory firm for commercial real estate owners, developers, builders and mid sized businesses announced two new engagements to restructure and provide Chapter 11 bankruptcy support services involving complicated commercial real estate partnerships in Chapter 11 Bankruptcy. The lenders have attempted to seize the subject real estate owned by these partnerships despite the significant equity contained the properties. One matter is taking placing in the U.S.  Bankruptcy Court for the Southern District of New York and the other in the U.S. Bankruptcy Court of the State of New Jersey in the Trenton vicinage.

The first matter consists of a 78 unit multi-family apartment building in the Bronx, New York, and the New Jersey matter involves a large Recreational Vehicle ("RV") Park located in Central New Jersey. GFCIB was engaged by the Partnerships to craft unique financial solutions with the goal of both partnerships realizing the economic benefits it originally contemplated while simultaneously solving the issues with the lenders in manner which is fair and equitable under the law and circumstances and in the best interests of all stakeholders.

Protecting, advocating and satisfying the needs and desires of our client’s one at a time.

For additional information contact:

H. Jack Miller
215-947-2974 ext 237
JackMiller@GFCIB.COM

Hidden Treasures in Commercial Deals, by H. Jack Miller

Hidden Treasures in Commercial Deals

There is an expression that you get the good with the bad, and yes, the bad with the good.  It is critical to have a complete and thorough understanding of what you’re getting before you purchase a property.  Such a transaction can be compared to a marriage, particularly, the vows of in sickness and in health.

However, the following are some pleasant surprises that I have experienced:

1. Land.  In several deals there was additional land which was not really counted on with the deal, but kept in the back of our minds as something of value.  In two of the deals, this added $1 million in profits for each.  Be on the lookout for extra land.
2. Abstracting the leases.  As crazy as it sounds, you would be amazed at how many times I have looked at residential and commercial leases, and the landlord or management agent was not getting the maximum value of what usually relates to what can be billed to the tenants.  These can be a hidden gold mine.  I would read every lease carefully and compare it to what’s really happening in real life.
3. Unbilled or under billed CAM or expenses’ reimbursements:  I have seen many a deal where the owners were not billing for what the lease specified.  Some common examples of what I have seen are water/sewer bills and escalations in real estate taxes. Pay close attention to how the CAM is calculated and what’s in it and what’s not.
4. CAM adjustments at closing:  Typical CAM is adjusted after the calendar year is over.  Adjustments are made with the tenants in February or March for the previous calendar year.  For example, if you close on a property in August, the shortage or excess for the following adjustment period is typically yours.  However, keep in mind that this can work for or against you.
5. CAM.  If it’s an existing lease, check the exact wording, or if you do the leasing, use a good lease and modify it.  Some common items you might be able to put in the CAM are a certain percentage on top of actual repairs and other expenses such as an administrative fee which is usually 10-15% on top of the cost.  You can also include in the lease the amortization of some major capital items such as roof, blacktop or HVAC work.  Of course, some tenants will negotiate this or put limits on it.  Of course, if your CAM is too high, you will frighten tenants away, or you will have to lower the base rent.  As in anything else, be careful and do not be greedy.
6. Size.  In real estate, size does matter.  I have seen leases in which the property is listed as a certain size, but in reality, it’s larger or smaller.  Commercial rents are typically based on the square footage so as they say measure twice and cut one.

  

Of course, there are the not so hidden treasures, such as underpriced units where you can raise the rents, real estate tax appeals, and developing the property for more optimum income.  Be on the lookout for the hidden treasures or ways to extract value from a deal for which you are not paying.  It can turn a single into a home run very quickly.

  

Written in November 2011 by H. Jack Miller, no part of this maybe copied or reproduced without the express written permission of the author. H. Jack Miller can be reached at JackMiller@GFCIB.COM

We are lamplighters

If we bring light into the world and elevate others it will be a good day

Real Estate Philosophy’s___________________________________

This meant to give the reader an inside look into the thinking of the author. The thoughts below by no means apply to all transactions.

You don't have to do that many great or good deals in life to be successful just don't do bad deals: Warren Buffet said something like that and boy is it the truth. Sometimes the key is not to grow or expand but to keep what you have.  There is a time for everything and in real estate picking the timing that is good for you is critical.  Do not be swept away with the tide, but try to get in and out as you see fit. There are many components of what I call the right timing. They include what’s happening in your personal life.  Do you have 100% focus to work on the deal without any major distractions, how full is your plate? By focusing on a new project will it distract you from anything existing that you’re working on? What is happening in the market place in terms of real estate trends, values as well as access to financing. The timing has to be right for everything, because it’s all part of the deal. Or you need to have the inter-strength and know how to piece the parts that are not aligned. Example, if you’re ready and the property is a good deal but the credit markets are tight like they are as of this date, then you need to be creative and fine a way to do the deal. Think outside of the box.

Do Not Fall in Love with a deal either before it’s yours or after it is.  Never be afraid to walk away from a deal. Do not get emotional and fall in love, If you do it will be a one sided romance as the deal does not love you. Remember its strictly numbers and reality, do not let you emotions cloud either one.

More Companies and People Die from Indigestion than starvation, the reality is we are deal addicts but taking on too much is a sure fire way for disaster. That once in a lifetime deal will be there when you’re ready. I have seen the smartest of people with great intent implode because of this. Make sure you take your time and fully digest the current deal before you take on the next one.

There Is A Deal a Day, never get too attached to a deal before you buy it, be prepared to walk away from it on the doorsteps of closing. There is a deal of a lifetime every 10 seconds if you have the buying power and talent. There will always be deals coming your way. It is those once in a lifetime deals that I worry the most about.

Put Your Partner’s Interests Ahead of Yours. I have a lot of partners and I think they would all say two thing. This first is that I work 24/7 and give it my all and the second is that I would jump in front of a bullet for them. It is my very firm belief that when someone entrusts you with his or her hard earned money you need to give your heart and soul too deliver.

The Devil Is In The Details, I can’t even begin to count the number of deals I have looked at or have been involved with that look like home runs at first glance, but as they say the devil is always in the details. In this business there are a lot of details. Make sure you measure twice and cut once or it will come back to haunt you.  Spend a lot of time in all areas large and small, it is those that are easily overlooked that are the most damaging. Do not count on anyone else to do the due diligence; you need  to do it yourself, especially the realtor and seller. It is critical that you have a full and complete understanding as to what the local township or city is looking for and will let you or make you do. The costs are too great to not do your homework.

Talk to the township; show them the building, read the ordinances. Plan, Plan Plan and then some.

The Art Of Negotiation Is To Analyze, be prepared, listen and keep your mouth shut. Do not say or do anything that will give your position away.  Remember you can always get more or less depending on which side you’re on.  Often saying anything or too much will cost you.  Do not negotiate against yourself by giving a floor or ceiling.  Make sure you leave something on the table for everyone.  Always have a walk away price in your mind, do not get carried away or emotional about things. Its just business.

I Love the Sleepy Assets and could never make money with the sexy ones. The problem with sex appeal in people or assets is that it’s short lived.  One of two things happens.  The first is you or the market gets tired of it and it’s not in or sexy any more or it gets old and looses its sex appeal. Give me something good, steady and reliable, without sex appeal. I want something that will out last the market trends of the moment, but will be here producing good reliable income in all markets for a long time to come.

There Are 3 Main Parts of a deal and in order to be a success you need to be a master of all three of them or know enough to know that your not an expert and either outsource or partner with someone who can pick up the slack. The First is the Buy: You need to know market values, trends and how to negotiate a great deal.  Included in this are many other things, For example if the property needs work you need to know how much work in dollars and cents is needed and how long will it take to complete the work, who can do the work, as well as financing it. The Second is to Manage the property and this includes property management, cash flow management, fixing up the properly if needed as well as dealing with contactors and tenants which in itself is an experience. The Third and final is the sale or disposition of the property. As crazy as it sounds I have dealt with a lot of people who are great at one or two of these but are lousy at the third, no matter how you play it you need to excel at all three.

Assets Evaporate Debt Does Not- Important words to remember and live by. The value of any asset can come down either temporality or permanently.  But the amount you owe someone will not come down unless it’s paid off. In fact, if you do not make payments it can go up.  It is a flawed assumption to think the value of the real estate will always go up. It usually will go up but the timing of this might not fit within your needs and time frame.  In fact I can tell you that with me at least, the timing usually is off.  It’s called Murphy's Law. The same is true with the cash flow of the property it can be up one day and nothing the next.  Either way you have expenses to operate the property. The expenses do not go away when tenants do not pay or leave the property.

Think Long Term: Do not think that things will always go up in value or always come down in value.  It is hard if not impossible to time markets.  Try to take a long term approach with your thinking of values and holding periods.  Another very important thing to remember is history.  While it is no prediction of the future, when thinking of history with real estate and financing remember that things are not

 always rosy.  Within the last 50 years we have had periods of 15 years where real estate values went up very little. We have had periods of time where getting financing was almost impossible and times when interest rates where both 18% and 5%. We have seen times of peace and times of war and everything in between. As they say the only thing you can be sure of is change and I guarantee that you will experience it.  So think 2 and 3 times about every move you make and always be on the conservative side of things.

Do Not Bet On Appreciation, as you never know if you will have appreciation or deprecation. Most probable over time pricing will go up and if you’re lucky you will not have to sell in a down market, but do not buy based on this.  All buys should be based on the market value when you buy the property.  Make sure you make money on the buy side of the transaction.

 Power of Compounding, this is a wonder of the world. If every year your income goes up by lets say a modest 3%, the compounding factor on this over time is giant and should not be ignored or overlooked. Over a 5 year period at 3% increases the total income increase is 12% and over 10 years its 30%, at 5% increases that’s 21% and 55% increases.  Giant numbers for the same risk and same work.

Power of Debt Repayment Is another Sleeping Beauty of the real estate business. It’s simple to take a 15-20 year loan and just wait it out. Look at the repayments of principle as forced savings. Over time it’s another giant and sleepy number.  A mortgage of 500k over 240 months at a rate of 7% the debt repayment is as follows: Year 1-11k, Year 5-70k, Year 10-185k. It’s like a fine wine that keeps getter better with time. Depending on what you’re buying and the debt load these numbers can become giant real fast. While not to often there is opportunity or benefit to assume a mortgage, keep a look out for debt that is advanced in the amortization schedule as it becomes much more appealing as the loan ages and the amortization tables become more tilted toward principle payments. If you take advantage of this, watch out for phantom income that you will have and will affect your taxes. 

Cash Is King: This is true in good times and truer in bad ones. There is always a need for it so never feel bad about accumulating it.  Everything will always be more expensive and cash intensive than you think or plan for. As important cash gets you the best prices when buying and keep you out of trouble.

Written in the 1^st quarter of 2008 by Jack Miller, no part of this maybe copied or reproduced without the express written permission of the author. Jack Miller can be reached at Jack@GFCIB.COM

Huizanga sold it to Viacom for 8 Billion, Viacom sold to Dish for 234 Million. Now all stores are closed...........................Lots of lessons here.

Other successful Restructuring complete in Ohio

November 2, 2013

For Immediate Release:

Huntingdon Valley,Pa./Fort Lauderdale,Fl.

GFCIB and Advisory, LLC a nationally recognized financial real estate advocate and advisory firm for commercial real estate owners, developers, builders and mid sized businesses announced that it has once again successfully restructured the debt on several real estate projects in the suburbs of Columbus, Ohio.

There was several real estate partnerships, with some differences in partners and ownership, and found themselves with several real estate investment properties that did not perform as originally projected. There were significant vacancy, cash flow shortfalls and underwater properties as well as matured mortgages. H. Jack Miller at GFCIB said they worked with the bank to accomplish a successful resolution to the issue, which was the best outcome for all involved.

In today’s economic environment we need to be creative when protecting the interests of our clients. We focus on distressed situations and have many ways of working them out. H. Jack Miller said we are glad our clients were happy.

We focus on advocating and satisfying the needs and desires of our client’s one at a time.

For additional information contact:
H. Jack Miller
215-947-2974 ext 237
JackMiller@GFCIB.COM

http://www.gfcib.com/restructuring/another-successful-workout-completed-in-ohio/



















http://www.gfcib.com/restructuring/another-successful-workout-completed-in-ohio/

5 Rules for joy and happiness

5 Rules for Joy and Happiness from the Jewish Prospective

Joy and happiness are fundamental Jewish traits; we are commanded to be joyful. There are great teachings on the need to be joyful and push away depression and sorrow, fight it like you fight death itself.  Our physical conditions and circumstances alone do not dictate whether we have highs or lows. They add to it for sure, but you see plenty of seemly very successful people not happy and depressed and you see many people in great distress filled with contentment and joy.  Ones emotions are the hardest thing to control but it is also the most important thing that we need to control.

Rule Number 1

Prayer and Turn yourself over to G-D will;

Make daily prayer part of your life, open yourself up to realize that we have no choice in some parts of our future and destiny, and turn ourselves completely over to G-ds will. We can not sit around waiting for G-D to do our lot in life we all need to work hard to make the best life we can, but all we can do is our best. You need to do our best and let G-d do the rest and we will be in great hands.  

Rule Number 2

Have Passion, Enthusiasm and share it with the world:

It is incumbent upon us to have passion and enthusiasm, you pick the topic and that’s what your reason is for being. Do things with Joy and optimism, be naive and optimistic don't be too much of a realist, as if we knew the challenges ahead of us as individuals and as a people the future might seem insurmountable.  But we don’t know and can’t comprehend the strength we have as individuals and as a people. It’s a mystery to us. So every day and every opportunity should be appreciated with passion and enthusiasm as its purpose is your purpose.

Rule Number 3

Give a lot before you ask for anything back: The more you give the happier you will be. But, also the more you give of yourself the more you get back. Yes, we need sustenance and security, but after that accumulating and keeping is not a joyful experience. We all have the common goal of bringing goodness to the world and to humanity.  

Rule Number 4

Elevate other:

Make your mission in life to elevate others. If you put a smile on someone's face or lighten someone's load just a little that maybe just enough to tip the scales and make a difference for you and for them. We all at times need a little encouragement or pat on the back; our mission is to give that. It’s a home run, as If you make people fell good that feeling will bounce off of them and you will be wrapped up in it.

Rule Number 5

Fake it until you make it:

Throw off anything but joy and happiness like a plague and embrace joy like it’s a part of your body and soon it will be you. Embrace all Light and things that are good and stay away from darkness and all that is destructive, soon the light will be as one with you.

Every moment of every day the choice is ours alone. What do we want to do, how do we want to feel, How do we want to make others feel. Do we want to use our G-d given talents? It’s all up to us.

Written in June 2013 by H. Jack Miller, no part of this maybe copied or reproduced without the express written permission of the author. Jack Miller can be reached at HJM613@Gmail.com