All Forum Posts by: Chase Louderback

@Charles Kao  I agree completely.  I should have worded my previous response more accurately.  Instead of showing him the underwriting, it should have been to walk him through the valuation process.  For instance, if he was capitalizing POH income or his expenses were artificially low because hes doing all the work and not being paid a salary for it.

@Christopher Morgan  It is pretty interesting how open some brokers are about "what's in it for them."  They just want to know that you can close so they can get paid or that you aren't wasting their time.  Did you happen to ask him if he would be open to helping you for a small fee?  That may be better/cheaper than the Costar membership.

It's really interesting what you are looking at developing, though.  I hope to hear more about how it goes.

When you do the test ad be sure to accurately describe what you will be selling/renting - preferably with pictures similar to what you believe the mobile homes will look like - and the a price a little under market you will be trying to achieve.  

If the add isn't relatively accurate you could also be shooting yourself in the foot by not getting an accurate response (one way or the other).

Could you get seller financing on the park?  As noted by many others in the thread, banks see the POHs as a risk and therefore will generally not capitalize the income from those rentals.

If we considered a park like that we would plan to sell off the homes to the tenants as soon as possible.  Have you tested the market to see demand and if that may be a possibility?  You could mitigate quite a bit of risk and headache by doing so.

Hope that helps!

A lot of good suggestions here if you want to make the deal work.  That said if you feel there is flexibility in his price and terms and his valuation is off, then just show him your underwriting.  That can at least give you a strong negotiating point as to why he should lower his price and if he still isn't open to doing so, then you have a strong position for requesting better terms.

Looks like you are pretty close on the price so hopefully you can work it out!

@Evan Smeenge

Gotcha.  You have $48,750 as total "cash" investment in the property on your spreadsheet.  That made it seem like you were not using leverage on that amount and therefore was capital you would have to put into the property out of pocket.  

Unless you have the amount of money for a conventional loan and are open to tying it up - in addition to the other cost saving suggestions - then you are probably going to have to look at other deals/less expensive markets.  

Maybe west Michigan has some deals that make some more sense?  Like you noted, the deal just doesn't pencil out.   

Hi @Amir B.

JV or working with one other investor could be a way to go. If you can work out a deal for them to hold a second on the property that you pay interest, for example, then that would avoid the syndication process.

Other options would be lines of credit, refinancing existing properties, leveraging other assets (using a paid off vehicle as collateral, for example), or selling other non performing assets.

Hi @John Lee

As you noted the analysis for commercial deals can be a little more complex. With single family deals you have the ARV, purchase price, and repairs, the equivalent in Commercial real estate would be current market cap rate, Exit market cap rate, repairs/value add plan to increase the value of the property.

So if you are syndicating a deal like @Scott Morongell was talking about you will have to analyze the property and see if your business plan will satisfy investor driven returns.  If you have capital and want to buy all cash and get a set percentage return then you could have quite a bit more flexibility in what you do.

Dave Lindahl's books Multi Family Millions and Emerging Markets are good places to start.  I found them to be quick and engaging reads.  Joe Fairless's Best Ever Apartment Syndication book is a really thorough read if you want to learn more about the syndication process and nuances of multifamily investing.

Feel free to reach out anytime if you have any other questions or just want to chat.

Consider holding off on that slide unless requested.  A lot of investors will want to know what their return is, when they get their money back, investment risks, the next steps and most importantly why they should invest in this deal and you.  

When you start introducing differences in IRR percentages based on equity splits and waterfalls they can start to get confused. That could be detrimental to your goal since confusion usually means they won't want to invest in something they don't understand.

Hi @Toben B.

Congrats on getting an apartment complex under contract.  The list @Michael Dang suggested appears to have everything you will need.  

Carefully go through all materials and leases you receive to make sure there aren't any odd clauses that could throw your business plans for operation off after you close.  Be sure to verify all their financial statements with their bank statements.  It's one thing to say you are getting/spending a certain amount and another thing for it to hit the account.

Best!