Specialist · Weeki Wachee, FL · Member since 2020 · 12 posts · 5 votes
I have a few investors more then I originally intended....great problem to have... now the question is how to spend the money to bring a good ROI for my investors and still make a profit myself? I am looking for an answer that I know has many variables so just maybe if you all don't mind sharing your initial costs on what ever the say 10 to 20 units may have been. What class neighborhood they are in . I'm looking for an average cost so I can start looking at deals and know what a good deal might be thank you all for your previous mistakes and sharing so that I may or may not make them for my investors.
Before looking at any properties I would speak to a SEC attorney. This sounds like these investors will be passively investing; is that correct? If so, you need to form a syndication. Next, what types of properties are you focusing on? What class of properties? What is your experience with multifamily investing? I would be very careful with accepting money from investors if you have not previously actively invested in multifamily; especially with where we are in the market cycle.
The price for a property that size will vary on various different factors- market, age, condition, how it is currently being operated/income, etc. To answer the question you would have to be a bit more specific just so that you are getting a number that is as accurate as possible and so it can help you get what you are looking for.
Before looking at any properties I would speak to a SEC attorney. This sounds like these investors will be passively investing; is that correct? If so, you need to form a syndication. Next, what types of properties are you focusing on? What class of properties? What is your experience with multifamily investing? I would be very careful with accepting money from investors if you have not previously actively invested in multifamily; especially with where we are in the market cycle.
@Michael D Newcomer I agree with @Charles Carillo you may want to step back and identify what you are looking for. First you need to find a market that you want to invest in. Once you get that down you can then look at the market and see what you can afford. If your focusing on everything you are focusing on nothing. I would NOT take money from people till I had done it and unless I felt confident with what I was doing. Based on your questions I am going to assume you have never done a commercial deal. Since you have never done a deal it will probably be harder for brokers to take you seriously especially if you do not have a basic understanding of how commercial real estate works. The lending might be a little harder for you to get because of the lack of experience as well.
What I would do if I were you. Study commercial real estate so you at minimum have an idea of what you want to do, find a market, talk to brokers, talk to property managers, talk to lenders.
@Nick Robinson @Charles Carillo .....the laws and various things like that isn't the real question here I'm already in works on being able to keep everyone legal and all that.... the question is asking about costs in different areas I know how to talk to lenders and all that good stuff I'm asking this forum so I can get an answer on here lol
You need to find an attorney who specializes with syndicated real estate deals before you end up in jail for violating laws in regards to using other people's money. Read about all the legal requirements on the internet for syndicated real estate and using other people's money.
It is quite simple to do the math to know whether or not a property will result in a profit. The cashflow is very insignificant compared to how much a property's value can be increased by doing some cleaning inside and out, painting, making the yard look nicer, bringing in better quality tenants and normal appreciation. The really big money for rental units is earned starting within a year when you increase the rents even just a little because then your cashflow increases, but the really big money is when you multiply the increased rents times the Gross Multiplier. Regardless, of what people tell you about the Gross Multiplier being only a Rule of Thumb calculation, the number is definitely used to determine the value for a property when it is for sale. To know how much money you can make for your partners you have to stretch out the numbers no less than for 1, 5, 10, 20 and 30 years projections on paper.
I was involved in two multi-million dollar syndicated real estate deals where I was the limited partner and lost close to $2 million. When you take other people's money you have a lot of responsibility and liability. Since you had to ask your question, you are not ready or qualified to invest other people's money and before you do you need to have a conscience and be aware that you are putting other people's money at a high risk if you don't have what it takes to find the right property, have the ability to manage tenants, have the ability to do the math, keep the property in good condition, have a good handle on how to do clean recordkeeping, how do accurate bookkeeping, send your investors reports, how the taxes work for every party, how to deal with contractors and maintenance, how to evict tenants and get new tenants quickly and the list is much longer.
@Michael D Newcomer If you want to know what things cost go on to loopnet to the area that you want to invest in and see what things are going for. When your asking for price its dramatically different based on location, quality of asset, etc. By asking that question you realize it seems that you have not done much research so everyone is telling you to rethink using other peoples money and do some research.
Example of price differences I close on a 14-unit in Mesa in about two weeks for $1.9m and I am going to put about $425ish into renovating the property and stabilizing it. With fees, loan etc. I am all in for just under $2.4m and it will be worth $2.9m in todays market. Just with that example you see that I can't tell you what the "average price" is. Just in that market this is a C/B property if you want to do the work to rehab it cost ~$136k/door if you want it renovated and stabilized, turnkey you are probably closer to $185-$205k/door. Just in that market you can go to brand new construction and the price jumps up dramatically or you can go down where you get a lower price per door.
That is why @Jeffrey Donis said you need to be more specific with what you are asking.
@Michael D Newcomer If you want to know what things cost go on to loopnet to the area that you want to invest in and see what things are going for. When your asking for price its dramatically different based on location, quality of asset, etc. By asking that question you realize it seems that you have not done much research so everyone is telling you to rethink using other peoples money and do some research.
Example of price differences I close on a 14-unit in Mesa in about two weeks for $1.9m and I am going to put about $425ish into renovating the property and stabilizing it. With fees, loan etc. I am all in for just under $2.4m and it will be worth $2.9m in todays market. Just with that example you see that I can't tell you what the "average price" is. Just in that market this is a C/B property if you want to do the work to rehab it cost ~$136k/door if you want it renovated and stabilized, turnkey you are probably closer to $185-$205k/door. Just in that market you can go to brand new construction and the price jumps up dramatically or you can go down where you get a lower price per door.
That is why @Jeffrey Donis said you need to be more specific with what you are asking.
@Nick Robinson I'm not spending there money without doing research for the people on here to assume that that is what is going on just tells me that there are alot of butts in the world I'm not one of them I'm only looking for answers on here because well it's a forum that I spent money on and would like to get a few of those dollars spent wisely lol thank you for your breakdown and the extra numbers they do help
@Michael D Newcomer Michael, I am not claiming that you are a "butt in the world" but "The road to hell is paved with good intentions". I was just stating that you have to be careful when you take others people money not because I think you are going to screw them but because investing is risky. Especially with everything going on in the world right now. Right now you realize the government shut down business limiting the supply of goods and services and then printed a ton of money. Can you say inflation. CPI was 4.2% y-o-y in April. This year after Q1 we were already at 2% inflation for the year. Then they want to give out more money (paying people without them providing any goods or service) and raise taxes on everyone. Now the FED says its transitory. Maybe? We will find out in October where we are heading. If inflation slows down then we can probably push this down the road a bit. If it is still high Jerome Powell will have to step in and raise rates and that will effect all assets and the economy in a bad way.
@Nick Robinson I actually am aware and also I'm not going to step in to anything without due diligence I asked a simple question just to gage different areas I drive a semi and do not have a million hours to be online thats why I asked on here and pay for the site
We bought a 12 unit for $265,000 10 years ago. It needed a lot of work but nowadays that's unheard of here in KC (other than the worst parts of town and even then it's cheap). The cost varies a ton based on the condition, location and performance.
@Michael D Newcomer, I have seen properties ranging from less than $50k/door in D neighborhoods to asking over $400k/door in an urban core fully renovated. Admittedly, the $400k per door is still available even though call for offers was 3-4 months ago.