All Forum Posts by: David Lilley

Investment Info:

Large multi-family (5+ units) buy & hold investment in Chandler.

Purchase price: $1,780,000
Cash invested: $450,000

At acquisition, the rents at 100 W Ray Road were an average of $200 below market for a renovated asset.

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

Potential to add over 600k in value.

How did you finance this deal?

Bridge loan

How did you add value to the deal?

Renovating unit interiors and rebuilding storage units.

What was the outcome?

Currently achieving rents 25% over initial projections.

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

Lima One Capital and CBRE.

@Justin Goodin your amount of loan proceeds will most likely be determined by DSCR and most of the time needs to be 1.25. So, don't look at the purchase price and think you only need 20-25% of that to close the deal. You must underwrite each asset to figure this out.

Also, make sure you are adjusting the property taxes to 80-90% of the purchase price because the banks will do this in their underwriting.

@Matthew Shay Properties with heavy value-add potential will sell for a lower cap rate than stabilized properties with little to no value-add potential. A 50 bps difference between the two is about what I've seen.

@Brad Penley You either have the drive to get it done yourself or you don't. If you are the latter, then a paid mentorship program can really be of great benefit to you. 

@Nick Rivers I would start contacting the big RE firms (Marcus and Millichap, CBRE, etc.) and tell them what you have and what you need. They surely have the network to place your capital in the little time you have available.

Just tell them what your credit score is and ask them what rate they would be at. They will want some specifics in regards to the purchase but they don't need to run your credit to give you a soft quote.

Congrats on finding a deal and getting it under contract. These two parts are the most difficult. 

Waiting until now to find a partner was a mistake. If you write an exhaustive post with all of the numbers and the deal happens to be stellar, you might have a small chance of finding someone on this forum who would be willing to step in and close this with you. Otherwise, I would back out and not waste any more of the seller's time.

@Michael Plaks  Why not do a cash-out refinance (nontaxable event)? Then, rent it out and 1031 down the line?

@Jack Zhuang the main reason you should go with properties of 5 or more units is that they are valued by the net income they generate. Because if this, you can force appreciation by increasing your income, decreasing your expenses or a combination of both. 

We are in the process of adding $40,000 to our net income by renovating a 16 unit complex we own. At a 6% cap rate, that equates to adding almost 700k in value. 

@John Hewitt take an accounting class if you haven't already and read everything you can on this forum. Underwrite a couple different deals a week.