All Forum Posts by: Darwin Crawford

@Llewelyn A. - amazing! thank you! Where would you suggest is the best place to start learning, and/or continue to improve on learning IRR?

Also - from WSJ: https://www.wsj.com/articles/banks-retreat-from-apartment-market-1487678401?mod=cx_picks&cx_navSource=cx_picks&cx_tag=poptarget&cx_artPos=4#cxrecs_s

Geez, you guys/gals really know your stuff!  This is fast becoming one of my favorite threads on BP!

@Mark A. - one theme that I am seeing here, and that I see a lot of at my day job, is specialized knowledge, and its ability to put an investor at or near the top of his/her competitive pool. 

It seems like those of the @Llewelyn A. variety are really, really good at underwriting and math. I have been doing this personally and professionally now for the better part of 3 years, and still am not fully there for IRR.

However, I come from a 15+ year background in construction and management, with a nerd-like focus on efficiency and building technologies.  That is my edge.  Others have theirs in underwriting, or maybe deeper pockets than the rest of us, or a nose for deals, or maybe the advantage of having grown up in a certain area, and knowing everyone.  

So while the original question seems to have been answered way better than I ever could, I am still a firm believer in "finding your why", (a la Apple Computers) and then relentlessly honing your edge.  What is your background? What do you bring from it that might make a property uniquely suited to you, where you can add value and create wealth because of what YOU are good at. 

I was able to gain an edge here in Scottsdale due to the building being master-metered, with lots of deferred maintenance, and about as energy-efficient as a screen door on a submarine.  Others passed on the deal, but I went for it, ran my numbers, applied my edge and it's working.  Do I want to leave my office and go repair high-voltage conduit on an Arizona Roof?  Not really, but I can, and do it better than someone who doesn't know how.  Cheaper too.  

This is just an example, but the MFH space is such a complex beast, and requires so many skills, that if you find your edge, and apply it, you might just land a great deal where you can shine.  

Also - goes without saying but THANK YOU to all the guru's who weighed in here.  I'm taking notes and putting this on my list to learn.  

@Kevin Manz - my advice is just that.  Mine.  However, the guy who wrote that book teaches at the Harvard Business school, so I'd say do what he says over what I say, as he is probably a lot smarter than I am. 

From what I've read, the "Zen Master" negotiators get what they want, and leave the other side feeling like it was a "fair deal".   Seems that in your case, keeping your tenant at the current rent, AND having him think its "fair" would be a win, correct?

You can also just sheetrock over it with 1/4" rock, then tape/mud/float.  We did that on a few properties and you can't tell a bit of difference except about 1/2" of ceiling height. 

I don't.  However, deal with about 5 turn-key providers in my day job in multiple states.  Please, please, please do LOTS of homework on whoever you select.  Some of them are GREAT.  Some of them will screw you.  I've seen both happen.  

Again, I don't do anything with the San Antonio market, but this goes for turn-key investing, and investing in general:  INSPECT what you EXPECT.  Preferably twice.  And mentally prepare yourself to get a plane ticket at some point. 

Good luck!

Mark,

While I am across the country, I look at different markets on the daily, and I get your frustrations.  In short, right now there is a lot of free capital seeking yield.  That, coupled with cheap money, has depressed cap rates severely in the MFH markets all across the country.  I have watched some sales here, and just don't understand them.  

Out here in the southwest, things are back to booming, tech jobs are pouring into sunny Arizona, and if you can find a 6.5cap MFH in a b/c area you are just flat kicking a$$. They barely exist, and the only reason the big guys are buying is that $ is cheap and the CoC returns are high with cheap leverage.

It took me months, and months of looking here for MFH before I gave up and went commercial for my first 8-unit deal, and I did it for precisely the reasons that you outlined. I have heard of a few deals happening in MFH here, but you really have to be in the right place, at the right time, and very liquid. As in see it, call broker, driver over with $5k EMD check in hand. Preferably more than that.

I would imagine a competitive market like NYC or nearby is going to be the same.  You just have to be patient, get good (and quick) at underwriting, and then the secret sauce, which I was told by a much richer investor is: be FAST to lock them up, and SLOW to do your DD in escrow.  

Keep your head in it, I hear your frustration and get it, but it just makes it all the sweeter when you do land a good one. 

Pick up a copy of "getting to yes", its a really good book on negotiation.  While I agree with @Thomas S. on the business side of things, I've made it a pet project to get good at negotiating, and its paying off handsomely.  Nothing like winning a business arrangement and the other side still likes you to boot.  Makes landlording laughably easier when your tenants want to keep you happy. 

@Terry Smith - happy to help, although I think "seasoned" is an overly generous adjective....

What I am learning through this process is that the low-level commercial stuff (In my world, that's sub $1mm), is just not super complex.  The big boys on here deal with lots of money, lots of numbers, and have some pretty fancy data analysis tools for what they do.  I think its a function of having to cover a wider geographic range efficiently, for which big data is very useful.  

That being said, for a deal in your backyard, that has pretty basic numbers, and a limited number of inputs, I feel comfortable saying that if it meets YOUR personal parameters of income, risk, management headaches (or kicks off enough cash to pay a PM), and you have truly done your homework, then go for it.  

Part of being a successful property investor, in my book anyway, is the ability to accept that you are going to miss things, going to make mistakes, but that you can handle them, however that may be.  

I personally come from a construction background, so "physical plant" issues don't bother me, and I consider it an advantage.  the same would play for a lawyer, or CPA, or banker, having a niche skillset that they bring to the table and can do better than the average bear.  

And ditto what @Dan Genzel said - seller financing should not affect your price much. One tactic I used was to run the numbers, and let the sellers know that as their building sits, a banker would have to be stone drunk to even consider financing it. I backed it up with DSCR calcs, and operating statements. In other words, their only hope of a sale was someone like me who can be hands-on, and they had better help me out if they want this turd off their books.

Also - pick up a copy of "Never Split the Difference" by chris voss

Don't know if that will work for this sale, but it worked for me.  Good luck! 

So I just got a place here in AZ under contract.  Small, 8-unit building of office suites.  I'm a little concerned on your cap rates, 6k/month on a $615K price seems pretty steep to me, that would be tough to make cashflow.  

Ditto on owner financing.  I'm in contract with some note buyers who snagged this place off a foreclosure last year, and aren't running it right.  

They were more than willing to owner finance it to me at some steep rates and at a price that was favorable.  That deal stunk to high heaven.  I walked.  Then came back, hit them where I needed to be, and bam.  Signature.  

So all I would offer is this - make sure the numbers work, plus a comfortable margin for safety, that will let you sleep at night, and then go for it!  If they won't take the deal where you need to be, then don't do it.