Recommendation for multi family analysis

21 Replies

So far, I’ve only done buy and hold residential real estate. I’m ready to start venturing into multi family and looking at some small apartment buildings (8-16 units) but wanted to get some recommendations on any books or courses out there specifically for deal analysis.

I know the basics and have my own spreadsheet (like a basic version of bigger pockets software) but because this will be my first I’m wanting to do some more reading and better educating myself to make sure I’m making a good informed decision on my first bigger deal.

Any recommendations that anyone has come a crossed?

@Trent Lee There is lots of free information out there about underwriting multi family deals.  It’s not complicated it’s income - expenses just like Residential. 

The main difference is management, insurance and operating cost will be a lot higher for multifamily due to the size of the property as well as deferred maintenance. 

Underwriting is dollars in dollars out.   Keep it simple and make sure you have solid historical income and operating cost info from the seller. The further back the better.

@Trent Lee - True, the analysis is largely just a matter of income and expenses.  But there can be a significant deviation with the inputs depending upon deal size, lending requirements, class of asset, unit size and mix, the market your in....there's more.

If you're good with spreadsheet it can be done.  If you're going to eventually syndicate deals you may want to look into a calculator that can handle that.  

Rod Khlief, Joe Fairless, Michael Blank and Jake and Gino all have decent books about this, I know Michael Blank and Jake and Gino also have calculators.  Justin Kivel also has a good spreadsheet/calculator course.

I have and use the Michael Blank and Jake and Gino calculators.

Joe Fairless has the best book I have ever read on apartment investing and syndication. It is very detailed and covers every aspect of the process. It's an easy read and serve as an invaluable resource. Also his podcast has a series covering purchasing / syndicating an apartment deal from start to finish.

@Greg Scully - thanks. I’ll check out their calculators. The one I have is good for a quick analysis but I probably need a more detailed and sophisticated one once I do a quick analysis and determine its diving into deeper.

@Greg Scully - between michael blank and joe/Gino calculator which do you recommend?

I’d like to get one of them but wanted to get your thoughts specialty for deal analysis. I’m not interested in syndication or capital raising

Originally posted by @Trent Lee :

@Greg Dickerson - thanks. I’ll buy the book. I’m not into syndication, simply underwriting them for my own purchasing.

 He goes into great detail on the underwriting process. It's more than just cashflow and expenses analysis. When underwriting a deal you want to take into consideration all aspects of the transaction including future performance and market conditions. I think you will find it an invaluable resource.

@Trent Lee check out the sample report on what we use on my website. It's on the investor consultation page. It's based on the best (cheap) software that I've found Cash Flow Analyzer. Let me know if you want more details.

Sergio

Hfireholdings.com

Personally, I learned the most about underwriting by creating my own custom cash flow calculator in excel and then underwriting live deals. This strategy is also a great way to build relationships and credibility with brokers: underwrite their deals, ask questions, and provide feedback on how the deal compares to your investment criteria.

@Greg Scully - Im browsing their site. They do look to have a lot of resources.

Since posting this I got Jake and Gino’s book and read the whole thing. I went through another udemy course recommended by someone earlier.

Lots of good stuff! I appreciate it.

@Trent Lee

Another big difference between investing in residential vs commercial is financing. You might want to do your research on what the property will qualify for so you can determine your actual cash flow. Everyone equates commercial financing to residential and uses residential Fannie and Freddie rates in their calculations.  Commercial financing is a very different animal. 

If your loan amount is below $1MM, at a local bank/credit union, the loan to value is going to typically be around 75% LTV. The terms for a local bank/credit union is typically a 5-year fix with a 20-year amortization or a 15-year fix due in 15 years. Local bank/ credit union qualify you and the loan on a global debt service ratio which means the property and you need to debt service the loan. Also, local banks/credit unions typically will not work with out of state buyers or foreign nationals.

There are other products available outside of local banks and credit unions.  There are also 5-year fix, 7-year fix, 10-year fix  (new is 30-year fix) with a 30-year amortization with a five-year pre-payment penalty and is assumable.  These products typically qualify the property only for the debt service ratio. 

If the loan amount is above $1MM, then you can go Fannie or Freddie or Hedge Fund which depending on the location, occupancy rate, unit break down etc. can be 75% LTV to 80% LTV. The term investors typically take is a 5-year fix with a 30-year amortization. But this year we have seen an uptake for the investors taking a longer fixed term like a 7-year fix and a10-year fix with either a 25-year or 30-year amortization.

FHA - HUD for acquisition is typically a 35-year fix with a 35-year amortization which has an amazing rate but many lenders will not consider financing unless the loan amount is $2MM and most prefer the $6MM+.

Hope this information is helpful.

Anyone using the RealData tools? The company has been around for a long time and the principal has a book out that I read years ago. 

https://www.realdata.com

What Every Real Estate Investor Needs to Know About Cash Flow... And 36 Other Key Financial Measures by Frank Gallinelli