All Forum Posts by: Dennis Tierney

Most books I've read by experienced owners/investors say that PM companies don't get cost effective till you get to 20 units or bigger. I use them and have kept to 24 units or bigger. If you can't afford to go that big consider putting together a syndicate that will allow you to invest in a bigger cost effective property and also allow you to move into the syndication business.

@Evan I can't speak to whether you should change to a Solo 410K but I can tell you that you do not need or want a representative to get involved with your transactions. I have used a checkbook SDIRA for 7 yrs and never needed anyone to review any transactions. What would be the point of checkbook control if someone had to look over your shoulder all the time?

My son has a 10 unit under contract that is a conversion from over 50 yrs ago (100 yr old building). Apparently it was never rezoned for multifamily. I'm leery of him buying it because if it burns he'll not be able to replace it with mutifamily as the rest of the block is single family. If he waits until it is rezoned that would put off closing until the committee meets again in June and he's supposed to close at the end of the month. What would you do? Options?

I have used a HELOC to help purchase an investment property, however, we had no mortgage and the HELOC was for only 33% of the home value. I think of it as just transferring equity from the home to the investment. We have a good rate of 4.5% interest only, but, paid it off in a little over a year. We'll not hesitate to use it again if the right property comes along.

@Swat Khan We've had fires in two different complexes, one we did report as it damaged 4 units and the response we had from the insurance co. was great and they didn't jump our coverage that much. It was especially valuable because we had rent loss coverage so had a lot less $$ lost in the end. The other was a smoker who accidentally set her own sofa on fire. that one has an installed fire suppression system so her's was the only unit damaged and she agreed to reimburse us the damages (over time of course).

My experience is that you can't get nonrecourse less than $500,000 unless you have a good relationship with a local lender and they have the stomach for nonrecourse. Of the three last nonrecourse I've gotten 2 were arranged by a mortgage broker with an insurance co. and one was witha local banker with whom I have a good relationship. Once you get over $2-3 mil they are easier since you can get a government lender (Fannie-Freddie) and they are nonrecourse.

We had 60 days due diligence and closed 30 days after that so 90altogether. The seller wanted less but Iknew it would take longer because it was a syndication and I'm glad I gave myself the extra time because we needed it with all of the different forms and info the bank needed due to 9 people involved in the syndicate.

We closed on our 2nd syndication deal on the 21st. It is a 48 unit (4 -12 plexes) all brick with pitched roofs built in the 60's so it needs some updating/rehab. It was self managed by the seller and the rents are below market and after we do the rehab over the next 12-18 months we'll be up to market rents with improved cash flow. We were able to purchase it for $1,685,000 and the first yr. NOI should be $135,000. After we're up to market rents NOI should be $161,000 - a gain in value up to $2,000,000 at an 8 cap. We raised $450,000 from investors and my syndication entity gets 50K in "sweat equity" and I invested 50K along with the investors. I find that they feel better about investing if they know I also have skin in the game. If operations go as I project we should have a first yr. cash on cash return of 8% and after we're at market rents should be up to 11% cash on cash. The plan is for a long term hold for tax advantaged cash flow. This is my first time actually getting sweat equity in a deal and it is a little exciting to be making a deal like this come to fruition.

In my opinion there's little comparison when you increase in size. With multi's I am an owner/investor not a property manager and spend my time in asset aquisition and money raising and leave the managment to professional managers. We currently get 170 checks (the managment co. does) and next week will go to 218/month with 6 properties. You can't get that kind of scale with single family.

@Spencer a RUBS is a Recapture Utilies Billing System. You bill the residents for the utilites based on the square footage of their apartment, dividing the bills on a prorata basis. This can be done when there isn't a separated heating or electrical system. We've also used it to bill back for water usage.