All Forum Posts by: Marc C.

How about buying a 4-unit and moving into one? FHA financing should be available with some ridiculously low down payment.

 And, more importantly, longer than the LENDERS are expecting. 

Yes, both Dallas and Atlanta are in MF bubbles, but it's all because "we're growing and jobs are, too." No one can call these up and coming markets...they up and came! 

I guess I really set off a storm with this post...glad to see so many comments! Great discussions, guys and gals. 

There isn't any! The cost of land and construction is so high, it commands premium rents, which means only Class A gets built. The only Class B stuff is Class C that has been upgraded. (Several recent articles to this effect in Multifamily Executive and other MF news sites.) And it's a legit strategy lots of investors are following here in Albuquerque. In fact, our #1 apartment lender, Washington Federal, says they really support those upgrades. "We don't want to just see lipstick on a big. We're seeking gentrification to provide an upgrade for those who now live in Class C properties." So they are willing to financing 80% of a purchase AND the rehab. 

Thanks for commenting! 

Wait And See

How ya feeling about the 2017 national multifamily market in view of the facts: Toppy stock market that people fear, stagnant personal incomes in many areas, 80% LTV's, rent growth rates slowing, new construction financing difficult to get, many markets overbuilt, historically low cap rates even after interest rates are up .75% since Nov. 1, multiple offers on listed deals requiring you to put down "hard" earnest money, 120+ real estate crowdfunding sites, TONS of multifamily newbies getting into their first deals, TONS of sponsors promoting multifamily deals, TONS of multifamily training courses, TONS of multifamily blogs and podcasts, several new books on apartment investing, aggressive sponsors who predict 5% rent growth and 20% IRR's because their exit cap rate is the same or lower than they are buying it at (not realistic in a period of rising rates), and I'm sure I've missed some stuff.

If you're a broker, you're telling everyone, "Sure, this will continue!" and you have numerous reasons...location, job growth, apartment performance since 2014. "It can't happen here: The vacancy rates are low, rents are climbing, folks can't get mortgages, new employers just announced x000 new jobs." I've heard this all before...in fact, I used to tell buyers the same story. And the trend did continue, until it didn't. 

Is it all too good to be true? 

Just remember: Rents DO go down in a recession. Cap rates DO go up. The Law of Averages is a LAW! It's a good time to be conservative in your projections. 

Of course, all real estate is local, and there are deals in every market. You just have to find them (and they sure as heck aren't listed in the MLS!)

I would suggest looking over the PPM's and operating agreements for similar buildings on the crowdfunding sites like RealtyMogul, RealtyShares, Crowdstreet. Compare what your sponsor is offering with what those sponsors are offering. You might even find a deal you like better. 

What I see on there most often is 8% preferred return, 75/25 split, 20% IRR for the INVESTOR (after all fees, etc.). But WATCH THE FEES: Some of these sponsors are being really aggressive.

You can start with multifamily; I did. There are many advantages over SFRs. But you need to spend the time to get educated: Read the books, watch the videos, etc. So much good stuff out there. 

Financing 5-20 unit properties can be challenging, so the other posters' advice about contacting a lender first is applicable. Skip the big banks: This will be a LOCAL lender; a portfolio bank headquartered in your state. You want to talk to the commercial banker who will drive by the property. (Want a referral? Ask your local apartment broker (not residential Realtor). 

I would be prepared to accept 75% LTV at around 5% interest for 5 years, and a minimum DCR of 1.25.

If your credit score is 700+, the property has 3 years of good and well-documented operating history, and you have a job, I think you'll get a loan on anything under 12 units, even if managed yourself. (But always budget for a 3rd party property manager as you never know when you'll need one...and you need to pay yourself for managing it anyway.) 

As for dealing with the bank: The more prepared you are, the better it will go. Prepare a nice package: Photos of the property, your financial projections, and a 2-page business plan covering what you plan to do with the property. Include 3 years of your tax returns for you (and the property, if you have a specific one in mind). They'll also want 6 mos. of your bank statements (plus a year's worth for the property), as well as documents supporting your current assets and liabilities. If you're under contract, include copies of the leases. Include a copy of your credit report, and copies of your credit scores from all three reporting agencies. If you're going to title it in an LLC, set up the LLC now; include copies of the organization documents, your operating agreement, and resolution authorizing the company to open a bank account and purchase a property. Get your EIN and state tax ID numbers now. Make a quick logo and some business cards. SHOW HOW PROFESSIONAL YOU ARE and you will get around the "previous experience" requirement.

Good luck. 

Private info like social security numbers are not on leases. This seller is being unreasonable. 

". I am working from personal experience with selling large office buildings, small office buildings, and a jillion single family rental homes and never before have I been asked to provide leases prior to closing. This is a first."

Uh, I'm working from personal experience having been an apartment broker and owning many buildings. And I can't recall EVER not seeing the leases during the due diligence period. Partly because, in my experience, lenders want them as well.

That said, you've got money invested, and this is a seller financing deal, so she gets to call the shots. But is this someone you want to do business with for the next x years during your contract? I would think twice about doing business with her: She seems quick to "lawyer up." She'll likely look for some other way to screw you in the deal. Make sure you do EVERYTHING in writing with her. If you hear from her attorney, have him/her contact your attorney. 

What's your "gut" telling you? 

By the way: Never mentioned it, but the property is in Albuquerque, New Mexico.

Anyone else have any opinions? Where are all the experts today? 

I guess another way to evaluate this deal is: What would YOU pay for this property, based on his tax records? Assuming a straight cash purchase?