All Forum Posts by: Carnet Williams

I've been running my proformas with three models. One is present day (what the broker gave me), one has what I believe we can get rents to spending 50% of total rehab costs and scenario 3 is stabilization and full rehab costs. Based on the model. Scenario #2 where we spend $150K of the $300K estimated for full rehab might get our rents 50% of the way to stabilization. It doesn't look very good. Spending the full $300K up front gets our return into expected ranges (IRR, CoC, AAR).

Question for you all. Do we bite the bullet and find a construction loan to get our full rehab in and get the property stabilized rather than do half and then try to finance the rest through cash flow? Eat a year or two of bad returns and get to our end goal in year 4?

I have also talked to a couple other folks and they feel that our property fits a missing niche. The new Class A is the high end tenant, we fit into Class B and a price point missing in the area. Full rehab gets our unit price to $58K and rents averaging $715. I have expenses at 39% which I know seems low, but I have 10% for maintenance, 10% for cap expenses, Vacancy and concessions 15%, proper mgmt at 8%, taxes 5%, insurance 4.25%. Am I missing anything? 

Stabilized numbers are: AAR: 18%, IRR: 17%, CoC: 12%

Thanks for all your help! My first multi unit investment...

Hey you all. I am under contract on a 24 unit Class C building (one bedrooms and two bedrooms). The owner has been self managing and the property is messy and any work done on it has been "half-***" The building has good bones and with an exterior and interior (per unit) rehab this can be a nice Class B building. The plan is to raise rents from an average of $590 to $715 over 24 months as we do the rehab. Contract price is $1.1M with an additional $300K for rehab. A value add from rehab and professional management. 

We just heard that the city just approved a 350 unit apartment building about 2 blocks away. These are going to be Class A with expected rents starting at $850 (studio) to $1600 (2 bedrooms). Construction to start in 2021. There is also a newly remodeled retail location nearby that has a couple vacancies (not sure how long these have been on the market).

The lender we wanted to work with backed out because of this issue. My question for you all: how would you assess our current situation? Our property is in a suburb that is seeing expansion from (Kansas City). It seems that our property after rehab will be B class so won't go after the same demographic as the new apartment complex. Is it a concern that we will be marketing to tenants who can't afford the new "shiny" development (with community center, fitness, etc)? Appreciate any advice on how to think through these issues.

Duh... thanks @Todd Rasmussen I didn't even know that area of the site existed. Thank you!

I am talking to four lenders right now for a commercial loan for a 24 unit apartment building. They all have asked for a personal finance statement (giving me the option to use my own version). Does anyone have a template they can share? Or is there an online resource? I tried googling, but all the samples were either super ugly or had far more information that I need. Appreciate any help.

Greetings,

I am talking to four lenders right now for a commercial loan for a 24 unit apartment building. They all have asked for a personal finance statement (giving me the option to use my own version). Does anyone have a template they can share? Or is there an online resource? I tried googling, but all the samples were either super ugly or had far more information that I need. Appreciate any help.

@Dave Foster that's a great idea having the operating entity. So the structure looks like this?

1) Property is held as a TIC with a TIC agreement (do we need a debt sharing agreement also?) between the owners

2) Property is managed by Operating Entity LLC that members own in proportion to their TIC ownership

3) Operating Entity LLC manages the P&L of the property. Holds the bank account and signs the contract with the PM and any other vendors

4) Operating Entity LLC pays each owner their pro-rata share of distributions (cash flow), but also can make capital calls pro-rata from each owner

5) When/if we decide to sell property, each TIC owner can choose to do what they want with the proceeds (1031 or not).

- Question. If we decide to refinance and pull money out, then each owner according to the TIC agreement would take our their pro-rate amount? Only upon a sale are the proceeds disbursed.

This is great! Thanks for the discussion. Unfortunately I did not buy in Marin. My 4 unit is in KC, MO and the 24 unit is also in KC, MO. 

I am waiting to get the actual P&L, the leases, other documents. I was thinking of asking for tax returns from the seller. Is that too much to ask for? I figured the tax returns would represent an accurate number for the property? 

Do you all check on zoning? Local building restriction? Validate property tax? 

Greetings. I have been searching the forums and still have questions regarding my situation. 

1) I own two one bedroom apartments in Minn that are in *my name with my wife* that we are in the process of selling to do a 1031 exchange. 

2) I have identified a 24 unit apartment building in MO that I have under contract. This property will be purchased with two partners. One will own 50% of the property and the other about 10%.

3) I live in a community property state.

From my understanding of 1031 rules I need to exchange the property from and into the same taxpayer id. Since I live in a community property state I can set up a disregarded LLC in MO to exchange my 1031 into and hold title to the new property. The new property will have to be held as a TIC and need a TIC agreement between all partners. I have also read that I will need a debt sharing agreement, but have not really seen an example of what is included in that (anyone have pointers?)

The question for you all:

1) Any advice on what should be in the TIC agreement (anyone have example agreements?)

2) How will this situation impact my commercial loan and is there anything I need to start working on earlier in the loan process so this isn't an issue at closing? 

3) I plan to create a single LLC in a year or two and transfer ownership into that single LLC to make it easier to refi/sell in the future. Any words or advice for how to do that or issues to be aware of?

Any other thoughts about this situation is greatly appreciated. I have been trying to piece together bits of information online and in the forums and hope this post might be helpful to others in a similar situation.

Greetings. I just put under contract my first 24 unit property. I started with a four unit last November. I have started a checklist of items for due diligence (e.g. inspections, rent roll, etc). What do you all have included in your due diligence checklist on a multi-unit? What are the things I should make sure to check in on before closing? Thanks for your help or referral to available resources.

Colin Douthit is awesome. Message me and I’ll make an intro.