All Forum Posts by: Andrew Cushman

@Jake Crandlemire, as Marc mentioned you can participate with someone who is doing a Reg D 506b offering  as long as you are "sophisticated."  If you have been doing private lending to flippers then it sounds like you would probably qualify.  I don't have any current opportunities available, however I sometimes do 506b offerings.  I was on BP podcast #170.  Listen to that to get a feel for what we do, and if you're interested reach out on BP and we'll go from there!

Andrew

@Keith Behney, what size properties are you looking for?  It sounds like smaller deals, so if you're talking 5-50 units the answers given by Juan and Ryan are solid.  Direct mail seems to work particularly well in that segment.

I would not completely dismiss the MLS, however. Oftentimes a client will hand a commercial property to their friend who is a residential Realtor, and that Realtor doesn't really know what to do with it. So, they plop it on the commercial section of the MLS and guess the price. I've seen some pretty good deals come through that way!

I typically buy properties that are 100 units or bigger.  In that situation, I've found the most effective way is to form good relationships with the best brokers.  They spend half their lives talking with and marketing to apartment owners.  If you are close to one of those brokers, they will bring you nice off market deals!

Good luck,

Andrew

@Vincent Chen,

The key is to build your local team - property management, contractors, etc. that can go look at properties for you and report back.  Also, you can get a TON of information on the market by spending some time doing research online.  Once you get under contract, then you buy a flight and do in person inspections, walk every unit, explore the market, etc.

Also, your deposit is typically refundable for the first 30 days, which is your due diligence period.  Some people waive that, but I generally don't.  All of that is completely negotiable.

Andrew

@Abou C.  For market info, there's a lot out there:

Free Broker Research/Reports (sign up on the website or request from a broker):

CBRE, Marcus & Milichap, Berkadia, Cushman & Wakefield, Colliers

Those guys are national.  Often the regional brokers will have reports specific to the metro they cover, which can also be very helpful.

Some Paid Ones:  ALN, MPF Research, Axiometrics.

For the above, if you build relationships with brokers and property management companies they will usually be happy to forward you the reports for free.

Some newsletters, magazines, and the like that are useful:

Multifamily Executive, Bisnow, Units Magazine, NAA Industry Insider, and the variuos newsletters put out by the other sources listed above.

Good luck!

Andrew

@Brandon Sturgill, everything Ryland said is correct.  The only thing that I would add is that I have done 11 506(b) offerings at an average cost of about $13,000 each.  The attorney I use is very well known and specializes in syndications.  If you'd like a referral just PM me.

Andrew

@Steve Lyman  Have you done any deals yet?  That is an important piece.  If not, you may want to put something together that is essentially a proforma or business plan, along the lines of what others have suggested above.

If you've done some deals already, it's rather easy.  For me, I just show potential investors the Investment Summary (i.e. prospectus or proforma or marketing package) of a previous acquisition along with some recent quarterly updates that we've sent to our investors in that property.  That gives prospective investors a real life example of what we do, along with real life results.  That speaks for itself.

For specific numbers, ask this question - if you were a potential investor, what would you want to see?  A small sampling of what we include is cash-on-cash returns, internal rate of return, 5 year proforma, all acquisition costs, renovation budget, any fees to us, terms of the loan, etc. 

While you definitely want to be professional with whatever you present, don't stress about making it too fancy.  Real investors can see through all of that.  In the end, they are really investing in YOU, so make sure you are authentic, knowledgeable, and confident.

BTW, the above assumes you are not talking about family offices, small funds, etc.  That might require a higher level of sophistication in your pitch.

Good luck!

Andrew

@Zac Davis and @Account Closed  The answer is both.  You should be working on finding deals while at the same time finding sources of private money, hard money, partners with money, etc.

With that said, proof of funds (POF) is NOT needed, even in a hyper competitive market. Sounds like you're sourcing deals from the wrong places and working with the wrong agent (keep in mind 95% of agents aren't investors themselves and don't really know how to work with investors. Doesn't mean they are bad agents, just not what you are looking for). Before moving into apartments, I flipped full time here in Southern California for 5 years. Not once did I show POF. POF is for retail, competitive deals, the vast majority of which aren't deals in this market. A smart wholesaler might ask you for POF. You need to be finding your own deals by getting directly in touch with the owners through direct mail, door knocking, etc. (there are many excellent posts throughout BP on how to do this). When you do that, proof of funds won't even come up. I talked with thousands and thousands of homeowners, and I never had a single one ask for POF! Be confident, know your terms and numbers, and they won't even question whether or not you have the money. I mean, if you don't have the money, why would you even be talking to them in the first place, right?

Get a deal with great numbers that way and you can wholesale it out - no money needed on your part.

Andrew

@Account Closed Loopnet is the Garbage Bin for commercial properties - it's where deals end up that otherwise didn't sell, or at best got posted there as part of a much broader marketing strategy.  So while it is possible to get a decent deal there, it isn't likely.  However, Loopnet IS a great resource in that you can see who in your market is putting up the most listings, call them, and start talking about what kind of deals you are looking for.

@Ryan Craig's suggestion is also a good one.  It takes more work but can lead to better deals.

Andrew

@Vasko Gorodetsky:  FWIW, at this point in the market cycle we are analyzing about 100 deals for every one we end up buying (we buy properties that are 80-300 units each).  There are LOTS of people out there willing to overpay right now, so you really have to stick to your guns and be disciplined with your underwriting.  But there most definitely are great deals to be had if your look hard enough.  I have found that for the deals I am looking for the most effective use of our energy is to leverage good broker relationships.  In the last 3 years most of our acquisitions have either been off-market deals brought to us by brokers, or deals that sold to other buyers - sometimes multiple times - but fell out of contract and we were eventually able to get it for the price we wanted.

Andrew

@Lynsey Staes What commercial lenders are looking for is the type and amount of experience you have owning and managing (either yourself or though a 3rd party) the type of asset which you are trying to buy. So, if you have a small portfolio of SFR, duplexes, and 4-plexes and are trying to buy a 5-10 unit deal in the same market, you will likely qualify since what you're trying to buy isn't a whole lot different than what you own. On the other hand, if you try to jump to a 100 unit apartment complex, you are going to need to bring in a partner that has experience owning and managing that sound of thing! Make sense?

As far as how to prove it, you simply provide a Schedule of Real Estate Owned, or SREO.  It is simply a spreadsheet of everything you own with a bunch of facts relating to those properties, such as the value, how long you've owned it, wtc.  

Andrew