All Forum Posts by: Brian Briscoe

@William Coet

What size multi-family are you looking for?  I think lists would work well for the smaller multifamily (2-30 units).  If you're looking to get into the larger ones, spend your time talking to brokers.  It's a broker's job to market and sell apartments so they already have lists of apartments and have personal realationships with many owners.  You obviously pay a broker's fee, but they spend the time making calls to their list of owners so you don't have to.  On the flip side, they won't be exclusive to just you because they're chasing commissions.

Bottom line, leverage brokers if you can.

32 units (plus a groundskeeper/leasing office that's currently leased as an efficiency unit).

It's right next to Benedict College.  C Class and section 8.

Appraisal listed ARV at $1.4M based off of a 9-cap... Broker thinks it'll be about $1.6M after renovations are complete, even with the section 8 occupants.

Nice part is, even if we have a hard time selling because it's section 8, it cash flows pretty well. Looking at 10-15% COC returns.

I'll be in Columbia next week to conduct due diligence on a property.  Any local investors that we can potentially meet up with while there?

Also looking for a good inspector that has experience in flooding if there are any referrals. This is a place that was affected by the dam breaking in 2015...

Oh, and @Michael Lawrence -- where in DC area are you?  I'm in Gaithersburg, MD.

Prior to the offer, you'll review the documents listed above -- rent roll, P&L, capital expenses, etc. As mentioned, you'll make sure you know what taxes and insurance will look like after you close and get a lender to size up the deal.  All really good advice. You should also run the numbers by a local property manager and ask them for their opinion of rent points and operating expenses - they can be invaluable in analyzing a deal.  

Now, remember, you're not going to have 100% of the information when you make the offer, and that's fine. We're very comfortable making offers with T12 and rent rolls (of course, we do a lot of independent research too). Make sure you have a contingency in the contract for due diligence (ask for minimum of 30 days). Also in the contract, you should ask for a TON of other documents for you to conduct due diligence. You'll want to check and double check to make sure everything matches. As mentioned above, during due diligence, you'll walk every unit and verify what all the documents indicate... Here's a list of what we ask for in our LOIs and contracts:

1. Operating financial statements for the property, including income statements, expense statements, capital expenditures, for the last two years of operation and year-to-date financial statements for 2020.
2. Prior two (2) years tax returns and addendums for the Property.
3. Current tenant leases, tenant correspondence, tenant credit information, tenant security deposit register, and delinquency report.
4. Onsite staff payroll records to include salary, bonuses, payroll taxes, benefits, etc.
5. Monthly owner statements and rent rolls for the past 12 months.
6. Contracts, service agreements, and files pertaining to the property.
7. List of maintenance all maintenance requests (complete and incomplete) for the last two years of operations.
8. Real estate tax billings and assessments and other correspondence pertaining to real estate tax calculations at the property.
9. Copy of Insurance Policy and claims documentation (loss runs).
10. List of capital improvements and any and all necessary related documentation and warranties.
11. All existing warranties and guarantees from architects, contractors, and material and equipment suppliers, all of which would be assigned to Purchase.
12. Any existing environmental Phase I/II reports, engineering reports, soil, mold, radon, asbestos, hazardous substance, termite, or other tests, studies, or reports.
13. Any existing appraisals.
14. Itemized inventory of all personal property.
15. Twelve (12) months of utility, water and sewer bills.
16. Twelve (12) months of bank statements.
17. Verification of additional income from operations including but not limited to application, pet, late, and other fees, etc.
18. Copies of title policies, title reports, land surveys, site plans, deeds, or any architectural plans for the property.
19. History of or pending litigation against the Property, its owners, or its managers related to the Property or the operation thereof.
20. Such additional information, documentation, or access as Purchaser shall require

It's one less thing....  Management is complicated and there are a lot of local laws, so for investors that have a portfolio that spans multiple cities and states, it's a lot of extra stuff to worry about. Some people, frankly, just don't want to or aren't good at it and choose to focus on their strengths. From a liability stand point, the PMs carry their own insurance, licenses, handle payroll, etc., which takes some risk from the operators plate.  My preference for now is to let a professional manage that aspect and I'll manage the manager.  As we scale, we'll discuss forming our own management company.  

@Todd Dexheimer nailed it... but, I'll add some meager data.

We closed on 55 units about 6 months ago. After operating expenses and PITI, we're netting about $12k per month right now. Once the interest-only period on the loan expires and taxes are re-evaluated, I expect that number to drop to about $6-8k at the current income level. Of course, we're renovating and pushing rents up, so we should get back up to the $10k per month mark.

As mentioned, there are variations between regions.  Our apartment is in South Carolina and Todd is up north in the really really cold region.  I lived in St. Paul for a bit and can tell you from experience...

@Ivan Sarabia have you considered passive investing?  Like many others, my company, Four Oaks Capital, can help people invest into much larger deals than they can manage on their own. Bonus for you, it's completely passive -- we do all the work and send you the returns.

Here's how it works -- we find an apartment complex, get it under contract, get a loan, raise money from private investors for down payment and rehab costs, then manage the property and renovations...  Every quarter, we send out investor returns and when we sell, investors get a big portion of the equity returns.  We typically have a minimum investment of $50k, so you could even split the money up into two apartment complexes.

If this is something you're interested in, let's set up a call.  There's a ton of syndicators in this forum that do the same, so find one you like (or a few) and see what they have to offer.

Investment Info:

Large multi-family (5+ units) commercial investment investment.

Purchase price: $768,000
Cash invested: $400,000

Value add, maybe a little hair on it. Bought at $23k per unit in a market where C-class is selling for $45-50k per unit -- 68% occupied at purchase. Will invest $10k per unit, fill it up, and make some money.

What made you interested in investing in this type of deal?

Multifamily is a relatively stable asset class that still delivers high returns.

How did you find this deal and how did you negotiate it?

Broker showed it to us... Not much to the negotiation piece here, just put an offer in, seller countered, we signed.

How did you finance this deal?

Bank loan... regular old bank loan.

How did you add value to the deal?

Added central air; resealed asphalt; repaired and painted siding; installed new flooring, cabinets, and counters.

What was the outcome?

Work in progress...

@Jack B.

Day late... Check local laws. In California, for example, you are limited to business hours for access to show the property, even with appropriate notice. Landlord entering at 6pm could be an issue... End of the day, is it worth risking the embarrassment - though not a federal holiday, it’s Valentine’s Day in the evening at someone’s home... just reschedule and don’t be a jackass landlord.