Multifamily Analysis out of state.

[Jamie Parker]

As a wholesaler, having the first look at a property is a cool perk of the skill set. checking to see if the numbers work comes first, but secondly if not first part A, how will the property be managed

Anyone investing in multifamily out of state, what’s the difference between the different amount of units? 2-4, 5-10, 11-24, 30-50 for example. 

But if say 15 unit and 30 unit are both 5 million, 7 CAP, or a 12 unit and 20 unit for 2 million 6 Cap. why would you choose one over the other?

What considerations would be required to address before making a “Yay or Nay” decision to move on an out of state multifamily property.

Toughts anyone? 

[Jonathan Greene]

Quote from @Jamie Parker:

Quote from @Jonathan Greene:

Quote from @Jamie Parker:

Quote from @Jonathan Greene:

Those are video game calculations. You can't decide which one to choose based on the minimal information you provided. That's not even the tip of the iceberg; it's so far away. Have you bought commercial multi out-of-state before?

No, I haven't. that why I'm asking the question, my good sir. I have referred a loan out of state based on NOI, cap rate at purchase, room for increase income and purchase price vs market value.

Maybe I didn’t articulate the intent of the post as clearly as I hoped

For anyone who has bought multi family out of state, “what are gives you the warm and fuzzies about a deal”:

Obviously not cap rate, but maybe vacancy rate, Cash on Cash ,GRM, IRR, Unlevered free cash flow, Cities over 250k? 150k? 50? LIHTC eligible, opportunity zone, STR eligible, property management in the area….

Pretty decent list. didn't know where to start so I figured I would ask the more seasoned of the bunch. Plus I recently got a brand new calculator, wanted to see what out of state investors though the most important aspects of deciding between to similar rates cap rates in 2 varied size apartment. 

You are asking all spreadsheet questions, which is what every investor who has been investing more than twenty years will tell you is wrong. A brand new calculator is just that, a calculator. It has nothing to do with real estate if you have never done a deal like this. You have to walk these properties, understand where the hidden costs are outside of the spreadsheets, and understand the geographic appreciation trend and migration and population as well, none of which will be in the questions you are asking.

 So basically its a "warm and fuzzy" about a property. Obviously the numbers HAVE to work. The technicals (migration rates, job growth, tax situation, debt cost, etc) to work as well. We are talking, underwritten properties that pencil out.  All things being equal.  If there is a choice to be made, it comes down to what an investor "likes" or prefers about one over the other? 

Additionally in terms of a GP/ LP relationship, would preference of LPs create the same dynamic in choosing one GP/Sponsor investment over another, if all technicals and numbers are the similar between two investment? Or are LPs more concerned about the technicals vs the warm and fuzzies? 
 

LPs vet the operator first, not the deal. The numbers are just that - numbers. Until you see the property in person the numbers are completely meaningless unless you have a working relationship with that listing broker for years. Everyone is hiding something at scale so when you just operate based on the numbers, you miss the whole show. That's my point.