Go all in as big as possible... Or not???

5 Replies

Hey everybody, so I have an issue and not sure what exactly to do. It is a good issue to have but still a big decision.

So right to it. I have saved up about 225k in cash and another 230k in stocks consisting of 401k and iras of with I could pull out a total of about 150k of. I also have 12 units in the form of three 4-plex buildings. I owe 198k on each one and they are currently valued at 325k.

So I have about 375k in Accessible cash and another 300k in cash if I sell my current buildings after commissions.

My goal is to scale up to as many units as possible over my Career and I have gone from 0 units in 2013 to 14 in 2017 (12 now after selling two single family).

Do I keep my 12 units that I currently have and use the 375k to buy a bigger sized complex? Or maybe sell buildings and have 675k to buy as big a complex as possible? Now I do understand that this is a lot of money for a blue collar dude like me and it has not come easy. I have bought and sold property and worked a TON of overtime to get this so it is pretty much all I have lol.

The struggles that I am having is a few things 1. I am having a hard time finding a good commercial agent/broker. Residential real estate is much easier to me because I have done much more and commercial RE is definitely a “who you know” game. I live in small town of 2000 people in northern CA so it’s a little tuff to network. Do I just contact several CCIM agents in all the areas I’m looking in? How do I get them to send me the “good deals”?

2. I have used 1031 before in residential and it obviously works fantastic when it works. If I try to 1031 the 12 units I currently have how do I find a decent complex in short time? I understand that’s part of it but can I write letter of intent with agent with the sale of properties being contingent? Can I reverse 1031?

3. How to get commercial agents to take seriously? I have been approved for 1.2m by lender in last two months for some small mIti package that didnt work out, but If I want to go as big as possIble and I dont have the whole 675k ready like now, seems like they don’t want to send me over a $2m deal if the cash isn’t ready.

I’m sure there is a ton of holes in my situation that you all will point out. So whats everyone think?? Thanks 👍

High quality problem! A lot of information here, perhaps too much about your personal finances, and I don’t really have any words of wisdom. I’m in a somewhat similar place on figuring out how/where to put money to work. These are tough and somewhat scary decisions, and right now I’m taking my time and reading and looking for the right opportunity.  

Not sure it helps, but hey, at least you’re in good company!

Good luck,

Marla

Hi Justin,

Commercial brokers, like residential agents, want to work with people who can close on deals, because that's how they get paid. You have a track record of closing on deals, so when having conversations with brokers, definitely bring that up.

Here are a few other tips for winning over a commercial broker:

  • Pay them a consulting fee
  • Take them out for coffee
  • Visit their recent sales and tell them what you do and don't like about the properties as it relates to your ideal investment
  • Provide them with information on how you will fund a deal
  • Constant follow-up: whenever you perform a task that brings you closer to completing a deal

Once you know how much cash you will have ($225k or $675k), you can figure out the max purchase price you can handle by assuming you will need 30% to 35% of the total project costs in equity. If you can only purchase a $1 million building, find a commercial broker who focuses on smaller multifamily.

@Justin Hannah Congratulations on a GREAT start to your real estate investing career. What you are experiencing is growing pains; I.e. you’re not totally comfortable with your inexperience and knowledge gap of the next level. I will tell you that most brokers do not have ‘off market’ deals, for residential they run MLS, for commercial Loopnet. If or when they come across a ‘deal’ they will call their list of buyers in the order in which they think the buyer has the highest probability of closing. The vast majority of buyers are not real, being someone who has already closed on property purchases carries a lot of weight. Good luck, I think you’ll do well
@Justin Hannah What market or markets are you targeting? I’d narrow your search to one maybe two max and seek to build relationships with the tips @Theo Hicks provided. It pays to be a player in the market so breaking in will cost you more at first than those who have been there before you. Simply meaning current investors in a market expect to purchase at a discount compared to new investors. I’m sure Theo could confirm that with his experience with Joe. Find a broker you Like and who is active in the market. You seem like an honest and straightforward guy and good to work with. I’m sure you will do great if you continue to put forth the effort. Best wishes to you!