All Forum Posts by: Charles Seaman

@Jeff D. Your tax and insurance escrows come out of pocket if you're using your own money or they're included in your capital raise if you're syndicating. The CapEx budget will vary from lender to lender. If you're dealing with a lender that's funding your loan based on the LTV (loan-to-value), then you will be responsible for the CapEx budget. If you're dealing with a lender that's funding your loan based on the LTC (loan-to-cost), then the lender will fund part of the CapEx budget (usually a large part of it).

Hey guys! I was recently awarded an off-market 64-unit deal in Columbia, SC. The deal has a lot of promise. I'm considering syndicating it, but am also considering a JV if I can find a money partner that's interested in partnering on it. If anybody is interested in discussing a JV further, please feel free to message me directly or respond to this post and then I'll contact you.

You're welcome @Trevor West.  That's what I do each time I look at a deal in an area that I haven't previously looked in.

@Trevor West I recommend reaching out to the local tax assessor in the area that you're looking to invest in.  Real estate tax calculations can vary greatly from area to area.  You'll want to find out if a sale triggers a reassessment (it does in some areas and not in others), when the next normally scheduled reassessment is, and how your tax bill will be calculated upon the reassessment.

@Anthony Barnard Being that you lack the capital and experience to do this deal, my first suggestion is to work on expanding your network so that you can find people to partner with that have the capital and experience.  Then you'll be in a much better position to do deals like this going forward.  If you have the right people on your team, then there's nothing wrong with starting big.  You just need to make sure that there's a clear understanding of which party is expected to handle which task and you need to set realistic expectations so that nobody's surprised at the end.

@Billy Archer Are you looking to focus on syndication or JV deals or to acquire multifamily properties using your own capital? My answer will vary depending on what your preferred strategy is.

@Blake Dailey All of the points that you noted are spot on.  In addition to the points you made, I'd also offer two (2) additional benefits.

1.  If you're dealing with properties that have loan amounts that are $1.0MM or higher, you can use non-recourse debt.  This means that there is no personal guarantee required in most cases and is a major benefit to many deal sponsors because it has less liability than recourse debt.  There are still many hurdles that must be cleared in order to get approved for such a loan, but the reward is well worth it.

2.  You get better service professionals than you typically do with single-family properties.  From brokers to property managers to contractors, the top performers oftentimes prefer to work with the bigger properties because they realize that there's more opportunity with them.

Investment Info:

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

Purchase price: $2,475,000
Cash invested: $1,348,400

Contributors:
Adam Balsinger

This is a 48-unit multifamily property that my partners and I own. We acquired the deal through syndication and are the operators of the deal. It is a value-add deal with a 2-10 year hold period.

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

It was a well priced asset in a good area that offered a large value add play through operational efficiencies, thus minimizing the risk that's associated with physical value adds.

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

I received it off-market from a broker and negotiated the deal by submitting a letter of intent through the broker.

How did you finance this deal?

It was financed using a Fannie Mae loan that was issued by Arbor.

How did you add value to the deal?

It will be added by increasing market rents to the amounts that similar units in the market rent for and also by charging a fee for individual garages. The previous ownership and management failed to capitalize on both of these opportunities, which leaves plenty of meat on the bone for us.

What was the outcome?

TBD, but big things are expected.

Lessons learned? Challenges?

The biggest challenge that I faced with this deal was timing due to the pandemic. I initially looked at this deal in late January 2020 and had it under contract prior to the pandemic. At that time, the deal wasn't stabilized and required bridge financing. There was a bridge lender onboard, but they stopped lending because of the pandemic. I then extended our due diligence period and the property became stabilized. I went through two (2) more lenders before finally getting the deal done.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Yes. I worked with John Phoenix of Cushman & Wakefield. He was the real estate broker on the deal.

@Dan Worontzoff In addition to window height, ceiling height and multiple means of egress will also be an issue.  Your best bet is to consult an architect.  If you'd like, I'm glad to refer you to one that I've dealt with many times in NYC.

@Hayden Harrington You're welcome.  Let me further clarify that it largely depends on the crowd that you're looking to attract as well.  If you want to attract more of a beginner crowd, then the education component will be very important.  If you want to attract a more experienced crowd, many of them will likely prefer straight networking, even though many of them won't necessarily oppose the education component.