All Forum Posts by: Derek Carroll

Multi family = anything more than a single family home.

In the industry there main classifications of commercial real estate are: office, hotel, retail, an Multifamily. Multifamily = apartments.

So yes. They are the same thing.

I don't know your market and what type of cash flow you can expect but consider these two additional thoughts.

Cash on cash return can still be large even with low cash flows due to low down payments. This would let you use down payment money for another property.

You're also building equity which can be tapped for future transactions.

I don't know the specifics of your deals but just wanted to put out some additional considerations.

I had a post typed out on the iPhone app but lost it...

Basically you get a lot of accounting benefits of having single purpose entities owning the property. This will help when going to sell or refinance because you can produce clear operating statements. For larger properties it will actually be required (most of the time) when financing.

You also get many personal liability protections to consider.

I agree that cap rates should not be used to evaluate a deal. However if you find that you're purchasing at a cap rate very different from market, time to dig a little deeper.

At the end of the day it all really comes down to NOI and for comparable properties in a similar area market forces will determine the the amount that an investor will pay for certain cash flows (cap rate). Your local commercial appraiser will be a very good source of knowing the cap rates of similar property transactions.

Cap rates are actually a very important number to be aware of,especially as you consider larger properties. But investment decisions are not based off of cap rates.

Cap rates are important to understand and know because they are the metric most used to value a property. If class a properties are consistently trading at a 7% cap rate in your area and you purchase at a 6.25% then, all else being equal, you're Payjng too much. Sure maybe there are reasons why you would pay more for a specific property or your cash flow still works but you at least need to understand how and why you are paying more than market.

This is especially important when it comes to financing your properties. Financing options are going to be based on valuations from an appraisal. Commercial appraisals will use multiple approaches to determine value but the most heavily weighted of these approaches is the income approach which uses local market cap rates. If you're hoping for a 75% LTV loan and you're buying at a cap rate lower than market then the property will appraise lower and you won't be getting the 75% loan.

You don't however use cap rates to make your investment decision. Looks at cash on cash return, IRR, ect.

Simply put cap rates are important because they help you understand the local market

I thought I remember seeing an email saying that there is now a bigger pockets iphone app but I can't find it in the App Store. Is this available yet? If not, when?

I work for one of the top DUS lenders. here are my thoughts:

you will be best served with a local bank or credit union. even for larger projects many times they're the ones doing the construction with the institutional investors doing the permanent financing.

also note that i do large scale commercial lending. you may very well find an agency program that will fit your needs on the residential side (less than 5 units)

this is an older book but one of the best

http://www.amazon.com/Real-Estate-Development-Workbook-Manual/dp/0735544360

im a commercial mortgage banker, reference this alot and hear that some of my longtime developer clients still pull it off the shelf.

I don't have good credit or much cash to invest. Currently have one rental property and I'm looking for more. I'm interested in accumulating properties for long term buy and hold with the main goal of equity buildup. Im comfortable if a property only makes $100 per month cash flow, potentially even comfortable with losing a few bucks each month on the right property.

That said, and with my current financial situation what type of strategy would you recommend? I'm thinking about finding seller financing properties that will offer 100% financing in return for purchase price a little above what they're asking. Obviously the rental potential has to support the payment or ill pass

What do you think of this strategy?
What other strategies should I be considering?

i'm planing on buying houses using seller financing. im thinking about winning over some sellers by lining up a buyer for the note at the same time. Obviously this will only work if note buyers are offering a reasonable %. Where are people usually trying to buy performing or new notes at?