All Forum Posts by: Gerry Logan

Was anyone who dealt with them talking to a gentlemen named Daniel Augustine?

Hi - Has anyone every gotten a loan from them? I have talking to them now. Due to the lack of any online precence I am very skeptical. 

Hi Abraham - This year my partner and I will have purchased 4 Mulit-family buildings this year all with over 4 units. In almost all the buildings we had a value add opportunity. You can spot these when the building has deferred maintenance as well as under market rents. For me this is always the ideal opportunity since increasing the rents will increase your NOI and then therefore raise the value of the property.

In some ways its similar to a buy and flip except your not rehabbing to sell but rehabbing to increase the value. Then extract that value to fund another deal. At the same time your collecting rents. 

Hi Arun,

I have closed on one 10-unit building and have another 12-unit closing this month. The properties are C and D grade neighborhoods in Milwaukee. In both of the buildings we have our tenants on month-to-month leases. In your lower grade areas you typically will have higher turnover. The month-to-month leases allow you to more easily remove tenants that stop paying rents. Additionally, you can also raise rents quicker as mentioned above.

One of the buildings is currently being remodeled and rents will be raised. The plan is to complete the rehab then rent the units out at the higer price. Once the entire property is stabilized with the new rents then we will do a cash out re-fi to pull out the equity for another deal. Our bank wants to see the new rents being paid for around 1 year.

It sounds to me like your building is almost stabilized with the new higher rents.  

Hi Eric - This is just my opinion. You have hired the management company as your agent. When your tenant pays their rent to the management company its as if they are paying you. The date of record for the payment should be the day the management company collects the payment. 

Hi Mario - First off I agree your interest rate is way too high. I just recently was approved for a commercial mortgage for a 12 & 18 unit building with 20% down @ 4.25%. I have also found another lender offering 3.75% with 25% down. 

From the time you make an offer to close could be only 2 months. You really need to line up your funds in advance and have that ready to go.

Hi Paul - I'm also from Chicago. I can't help you with your question. I would also be interested about investing in Tennessee. I have heard good things about Nashville. 

Anhtum - even though properties under 4 units are still considered residential, you can still use the income approach to determine what the price should be. There are alot of markets where the asking price and the income based valuation are not the same. As an investor I would not buy a property if that was the situation. 

There is a ton of info out there that can help you understand how it works. 

In a nutshell its like this.

1) Get the existing rents and also determine the potential rents.

2) get all the expense information the owner would be responsible for. Such as taxes, water, refuse, insurance, gas, electric, property mgmt, etc. 

3) Income - Expense (before mortgage) = Net Operating Income. NOI * CAP Rate = purchase price.

4) Cap rate - this you will need to get from either a local real estate broker or from a commercial lender familiar with the area. 

5) If your valuation is less then the asking price you want to try and negotiate or just walk away cus the deal is no good.

Hi Arthur,

I recently found a good deal on Loopnet. Its a 3 building package with 48 doors. Alot of people don't like Loopnet. However, it never hurts to look. Finding a broker plugged into the multi unit market is also essential.

I'm apart of real estate partnership. We have been using a small local bank for the mortgages. All our deals use the income approach for determining the price. Learning this method to evaluate properties is essential. Its also the way our bankers use to underwrite.

The whole process was not terrible different then a residential mortgage. 

You'll need to put together an investor profile of yourself as well as a personal financial statement. 

The bank wants to ensure that the property can pay for all of its expenses and that you personally have enough liquidity. I like to hold a 6 month emergency fund. 

We are using a property management company to do all the hard work. I don't want to get bogged down managing the property. I just want to add to our count. 

Regarding where to invest. You want to find areas that are owner friendly and that also have good returns. 

Hi Shawn - You definitely want to use the income approach to price the property both before and after rehab. There is a ton info available on bigger pockets that go thru this. The great thing about the income approach is that comps don't matter since your valuing the property based on its NOI.

There are some key pieces of information you need to gather.

1) Current rent and potential rent after rehab. Your broker can help you with this.

2) CAP rate of the area the property resides in. Broker or local bank would know this.

3) Property expenses. Taxes, refuse, electric, gas, water, Property Mgmt fee, etc.

4) Find yourself a calculator to then use this data. There are a bunch of excel sheets on the net or even within bigger pockets to do this. You will be able to determine a fair purchase price and also determine your IRR.