All Forum Posts by: Charles Carillo

Brian Wager is today’s guest on the podcast. Brian started off with a single-family rental acquisition and was cash flowing monthly with a $450 mortgage and $900 in rent. However, he felt that he could be doing more and decided to then get into multi-family rentals. He chose the value-add multifamily strategy and Brian, along with his wife, would drive around different areas, look for value-add properties, contact the owner and ultimately make an offer. While Brian Wager relied on bank loans and loans from friends for his first acquisitions, he found his niche with seller financing. Seller financing worked for Brian because it allowed him to avoid banks and friends while the owner was able to receive a higher price for their property. Additionally, the seller didn’t see this arrangement as high risk because they were well acquainted with the property and how it performs. Typically, Brian would payoff the seller in a few years after he had completed his value-add strategy and refinanced the property. Brian’s company; Wagers Capital, is based in Arkansas where he now focuses on acquiring 100+ unit multifamily properties.

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The constant question with many real estate investors is should I use a mortgage broker? In this episode, Charles explains the pros and cons of using a mortgage broker and how to choose one that will best fit your needs.

Talking Points:

➡ When you are purchasing real estate, your lender will most likely be your largest partner; usually providing 65% - 80% of the sale price. The question I often hear is; “Should I go direct to a lender or work through a mortgage broker?” and the answer is it depends.

➡ Typically, I would utilize a mortgage broker but, in some instances, I will go straight to lenders or banks. This usually is the case with smaller properties where local banks are really the main source or only source of funding and where I might already have a personal relationship which makes a huge difference when getting financing from local banks and credit unions.

➡ In most cases however; working with a broker is usually the best route. Yes, you will be paying for the services of that broker but you are tapping into their experience, relationships and knowledge.

o Mortgage brokers are involved in more deals than you are and know the market inside and out. They are speaking to buyers and sellers all day long while pulling quotes and they will know the best lender fit for your deal. If you are not the perfect borrower or the property you are buying has some issues, they will know where to go to get it funded. They will make sure to present your deal to the right lender, in right way.

o Lastly, if you are purchasing a property from a large real estate brokerage, they usually will have their own in-house mortgage broker. If you are in a hot market, telling the real estate broker that you will use their in-house mortgage broker might help move your offer to the top since their firm is going to make more money on the sale with you versus another buyer.

o A good mortgage broker will pay for themselves many times over.

➡ How do you choose a good mortgage broker?

o Get mortgage broker referrals from your real estate broker

o As mentioned above, if the real estate broker has an in-house mortgage broker, make it known that you want to use them. Keeping the loan in-house will help incentive the real estate broker.

o When you are vetting mortgage brokers; make sure that they are active in that market, asset class, property size and property class. If you are buying; un-stabilized, 20-unit, value-add, B class apartment buildings; how many similar deals have they closed in the last 12 months? What type of rates and terms were they able to get the buyer?

o Explain your business, your team and your goals to them. We have 3 partners and currently own 50 class B apartments in this city and have a 3rd party property manager. You focus on purchasing 20–40-unit apartment buildings in these cities etc. You will be vetting them but they will also be vetting you.

o I suggest putting together a professional looking brochure about your firm (or maybe just you) that you can email out to mortgage brokers or anyone really that you might work with. We have one that we provide to potential people we might work with; real estate brokers and mortgage brokers or even potential passive investors. This will put you ahead of the other potential investors that they are vetting at the same time. This will also help with your first deal since the broker will know exactly how your business is structured, who are the partners, what is their bio, how many units you control etc.

o If you are new, a good broker will help prep you to purchase a property like creating a financial statement, schedule of real estate owned, resume – making you a strong buyer in the eyes of the lender.

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@Cody Morrell

Here are my favorite books:

Multifamily Millions by Dave Lindahl

The ABCs of Real Estate Investing by Ken McElroy

The Complete Guide to Buying and Selling Apartment Buildings by Steve Berges

Commercial Real Estate Investing by Dolf De Roos

Trump: The Best Real Estate Advice I Ever Received by Donald Trump

Tax Free Wealth by Tom Wheelwright

Commercial Real Estate 101: How Small Investors Can Get Started and Make It Big by David Lindahl

Raising Private Capital: Building Your Real Estate Empire Using Other People’s Money by Matt Faircloth

The Definitive Guide to Apartment Marketing by Josh Grillo

Investing in Apartment Building by Matthew Martinez

Crushing It in Apartments and Commercial Real Estate by Brian H Murray

The 7 Secrets to Successful Apartment Leasing by Eric Cumley

2 Years to a Million in Real Estate by Matthew Martinez

Burn Zones: Playing Life’s Bad Hands by Jorge Newbery

Commercial Mortgages 101: Everything You Need to Know to Create a Winning Loan Request by Michael Reinhard

It’s a Whole New Business!: The how-to book of syndicated investment real estate by Gene Trowbridge

Max Sharkansky is a native Los Angeles resident who left his full-time job as a Senior Associate at Marcus & Millichap and partnered up with a friend to start buying distressed multifamily assets.

Max shares his financing strategies and how he uses agency loans on smaller distressed multifamily deals but generally utilizes bridge financing on the larger ones. His team is well versed in all aspects of construction, in addition to buying, foreclosing, leasing, and selling properties.

Today, Max and his team have branched out to buying distressed multifamily assets in other states. His business now focuses on acquisitions in the South East region of the United States. He has an office in Miami; where he has relocated to.

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@Marcus Gaethke

This does not seem to be a circumstance that was foreseen by the seller. He is working to get the tenants out but he needs to work through the courts. This is most likely out of his control. I would delay possession of the property until it is vacant; do you really want to take over a property and need to complete an eviction from the beginning? It sounds like the seller was acting in good faith and there are going to be plenty of tenants later in June and in July that want to rent. I do think the $2k is unreasonable since it sounds like it was not the fault of the seller that they have not left.

@Wyatt Dixon

It sounds like this will be a 2-4 unit property, that you will purchase with a FHA 3.5% down payment? In that case, you would need the 3.5% plus a couple more percent for closing costs etc. I would also have a reserve fund that you hold in a savings/money market account for unforeseen expenses and required repairs. No matter how new the property is or how updated it is; there will be items that need to be repaired or replaced in the first 6 months. Personally I would say to have 8%-10% of the anticipated purchase price. The more the better. You can also spend the next 12 months paying off any debts you have as well. That will make it easier for you to be approved for the mortgage.

@Kristafer Nicaj

If the business fails; you now own 50% of an industrial building; what do you do then?

@Jill Dolnicek

Yes, I would sell it and move on. This property will most likely never cashflow (when you factor in vacancy and maintenance); even if you get the rent to $1500.

@John James Gibson

If you find a syndicator that is interested in a deal you find and underwrite; you can ask them for a small piece of the general partnership. You could also partner with a couple different syndicators and underwrite the deals they find and be compensated with a portion of the general partnership once it closes.

@Calvin Schmeling

A joint venture can be setup as a partnership, LLC or corporation. Typically, you will setup a LLC. Contact your real estate attorney, tell them what your goals are, what you are looking to do and they will draft the LLC documents. The LLC is a business entity; it will have minutes, a bank account and will require bookkeeping of income and expenses.