As I alluded to earlier, I have started a new venture that is pretty exciting. Things have been finalized now and I am willing to discuss some details.
Several months ago, I attended a get-together of several people from the richdad.com message boards. I came out of that meeting very fired up on apartment investing and got started on educating myself on that subject. I haven't gotten very far in that respect, but I have put another one of the important points from that meeting into play - partnering.
Les, one of the presenters and participants at the meeting, is someone whom I have had some limited contact with over the past 4 years. He has recommended a couple of investments to me that have done pretty well, he has a great reputation, and after spending a weekend talking and listening to him, my comfort level with him is fairly high. So when it became apparent that I wasn't going to be ready for apartment buying in the near future, I decided to look at other investment opportunities. I contacted Les to see what he had available. Most of the projects he had were medium- to long-term investments that were expected to generate large capital gains, but no cashflow. Since I am looking for cashflow right now, I eliminated these. There were two that did provide cashflow and, after reviewing them, I decided on one.
My investment is part of a $1.75 million dollar first mortgage on a commercial renovation project going on in northern Louisiana using hard money loans. The project consists of two office buildings, a parking garage, and a parking lot. The project has been going on for 6 months so far, with an estimated 6 to 18 months remaining. At this time, the principals will refinance to a conventional loan and pay off the hard money loans. One office building has a 30% occupancy rate, the other 5%. However, the building with the 5% occupancy rate already has a positive cashflow, so there is huge room for profit there. The people doing the rehab feel the other building can be brought up to market occupancy and rates in a short amount of time. (One reason the occupancy is so low is the previous owner was planning to convert the top two floors to condos, so they weren't even attempted to be rented out.) The renovations they are planning will improve the existing office space, allowing higher rents to be charged - going from around $5 per square foot to $8 - $10 per square foot.
My investment is actually a separate contract between Les and myself. He had a large amount of his own money invested and I am buying out most, but not all, of his position. My investment is for $150,000 at 12%, with interest only payments for 6 to 18 months, after which the principal amount is due. There is no prepayment penalty. The project has a history of on-time payments. The contracts were faxed on Friday, the money was wired, and I am now a hard money lender on some commercial property! This is my first investment with the "big boys" and so far, I am impressed. Les is the total professional and doesn't keep you hanging - less than 1 week elapsed from the time I decided to invest until the process was complete.
Several things excite me about this investment. First, it a large amount of my money. The houses I have written about to date are investments for a group of investors (except for the very first one, which was also solely my investment) who have basically hired me for a percentage of the profits. I am using their money. This investment is all mine. Second, it commercial property. And lastly, it out-of-state. Although I have a couple investments in companies in the San Francisco area, they are relatively small, so I consider this my first real out-of-state investment in real estate.