All Forum Posts by: Sanjoy V.

I have looked at Multifamily Investment over the last few years. I’m trying to understand what’s the average return, IRR, cash on cash and also average five year return if you invested $100,000. Is there a industry norm for syndication, returns etc, fee for management, initiation fee etc. Understandably,everybody has different strategies. Also trying to understand what’s the average percentage taken by multi family management syndicator for management, 1 to 2%? Averages for these; 1. Deal initiation fee at closing 2. Syndicator management fee monthly 3. Percent split on profits 70/30 or 80/20, waterfall? 4. COC return, average IRR. 5. If investor puts in 100k what do you expect to make at 5 years including the invested amount. Thanks in advance!

Originally posted by @Bill F.:

@Sanjoy V. Not trying to be rude, but if you have no experience what has made you believe that the in place PM is really good? What metrics, besides occupancy, have lead you to this conclusion? 

Being $50-100 below market with utilities included, I'm not surprised its 98% full. 

As others have said, step 1 of this deal is getting financing. Are you sure you can get agency debt or has a loan broker told you he thinks you can get agency debt? 

What are you going to do if you don't get agency or CMBS debt?

Do you or your partners have any asset management or some equivalent project management experience that shows you guys have a track record of developing and executing a plan? 

That is the kind of stuff that the Asset Mangers (you) do, not the PM's

Couple things I looked at, makes me think the PM is good: 1. The variance between Physical and economic vacancy is quite low 2. They are well known in the area, and some of the seasoned guys use them, they are good with the demographic being catered to. 3. They help with the renovation of the units at low cost, I have seen some of the units done. 4. I looked at the profroma from the management for the next year, to make sure it aligns with my goals Again, I did not go looking for this deal at 5-6 million range, its one of those that made sense. I have a full time job and for me to spend resources, it needs to be worth. But all the points are valid, its wise to start with something smaller and gain experience. All I can say, I am not going in blind assuming these guys will run the property and I will collect checks. My plan is renovate add efficiencies, and increase the rents through interior renovation, which is already under place. All new leases are at already renting at market rate, which is $65 more than current rent. 65% of the units will needs to be brought to market rate. I called them multiple times pretending to be a renter and all market rates were quoted and didn't have any immediate availability. Thanks for your honest feedback.

This is a C+ area. Property as is good, but can improve curb appeal. Mainly blue collar workers, its not the hood. It has a swimming pool, laundry, gated entry to the main property. Checked Trulia, doesn't report high crime area. Median income is 50k plus.

Fred/Fannie

this is going to be a non-recourse loan

Thanks everyone for the feedback. I have 3 other partners in the deal. They do not have any multifamily experience. But the current management company is really good, I intend to keep them, they manage everything, including small value add portion of it. Its 98% occupied and debt is covered at 70-75% occupancy as well. I called all the neighboring apartments and all are renting at least $50-100 more, with some improvements. I don't think I will implement RUBS (reason it stays full is, all bills paid), but plan to improve water and electricity efficiency to cut costs. Talked to tax attorneys about fighting tax increase etc. Engaging CPA early on. There are 3 other units, that are not being utilized right, used for storage, and one for office. I plan to rent them out, and find alternate solutions for storage, outside in the parking or some place else. That should increase the NOI, also add covered parking. Might want to get out of the deal in 2 years. Of course, if the caps go from 6 to 8 in 2 years in Fort worth, then most are toast; and then I will have to hang on to the property longer; there is cash flow at current rents.

I was in the process of talking to different folks to build my team prior to seriously considering a off-market 6 million deal in Fortworth/Arlington Texas area. I called this tax attorney, who scared the heck out of me. He thought I was nuts to look at deals that large when I haven't done any deals before. He was this elderly man and he was surprised at how the market has gotten, that people like were trying to invest. He asked if I thought the deal was a steal; I said no, it isn't, told him not sure if I will find one in this market. He went on to say, I was being foolish with my money, trying to buy in this market, without experience. If he was a banker he would never give me a loan, for not having any experience and would trash my application. He said, to be a real estate investor, you need to be 'busted twice' or seen the cycle/s. I told him I have researched this for 2-3 years, talked to multiple people, read everything thats out there, and was not jumping at any deal thats out there. Told him there is a management company already there and I have compared the rents etc and looked at the area, its a blue collar apt, median income is 50k plus. Its still has lower rent, when you take All Bills Paid into consideration. Its a class C apt, in an ok neighborhood, no crime, checked Trulia; I checked the rents, there is room for growth with value add, thought to improve curb appeal; its location is central near employers and shopping. Going in cap of 6% even after taking into consideration new tax which is 40k more than previous year, otherwise probably higher cap; and year 1 cap probably 7.5, with COC close to that. I will go for a 10-year loan, amortd over 30-years, plan for multiple exit strategies, based on the market. Hoping to get Fred/Fann loan, only issue, is lack of experience, but I am able to meet all other criteria; lender thinks I may be able to get by that, with having Mgmt company in place. Of course, now you start thinking about market crash, paying too much etc. IN 2010, stuff was trading at 9 CAP in Fortworth, Arlington area. Per door price was also ridiculously low. Anyways, not sure why folks use per door pricing when sqft can vary widely, and value is based on income a property generates, not the "door value". So now I am stuck, in self doubt, I am trying to rethink this whole thing, am I being too bullish with my first purchase? just want to see if any other BP folks have done a big deal as their first investment, also taking this market and area into consideration? Thanks in advance!

I am trying to understand the earnest money technicalities. Have a novice question here, bear with me. If you are making a $125k earnest money deposit on a lets say 5.5 million dollar deal. I have been told, it will be applied to closing costs as credit. Lets say for a 20% down, you come up with close to $1,350,000 cash (included 4% closing costs). If you gave away $125k as earnest money out of the 1.35 million cash, do you have to come up with additional $125k to make up the difference? Because I can't imagine there is going to be $125k closing costs. Or do you ask the seller to give back the difference at closing. Because, I don't want to be losing actual $125k hard cash, I'd rather have the bank pay that and I pay 20% of it.

ok thanks!

I am looking at properties ranging from 70-100 units close to $5 million. I’m trying to understand how do we go about trying to pick an attorney and CPA. this is in the Dallas-Fort Worth area. What are the criteria to look for and what questions to ask the attorney to see if they are good and up to speed. With CPA also, what questions to ask to see if this is a good CPA and is up to speed with the current law. What is the typical fee from attorney standpoint for a deal this size, to do closing, psa, waterfall agreement with 2-3 other limited partners. Any other thoughts, input, would be really helpful. I don’t know if one can make any referrals on this forum, but any referrals will also be great. Thank you