All Forum Posts by: Peter Lee

Good pt,

After I saw this infographic that shows the bond returns in low single digits now it makes sense to me. The guys who create the bonds will collect a nice fee and the returns while unsexy, as long as they are marginally positive, I guess the structure works.

http://www.bloomberg.com/infographics/2013-12-20/blackstones-big-bet-on-rental-homes.html

Also wondering what people think their leverage, cost of debt, expense ratio, and appreciation assumptions are. Lot of scenarios I ran don't come up with high returns. Only thing I could easily see bumping up the IRR significantly is assuming 5%+ annual appreciation over say a 5 yr hold.

Pat,

Mind if I ask what your expense ratio is, i.e. how much of your rent goes to expenses? I have been also quite curious how those guys make it pencil. I am assuming their biggest advantage is their cost of capital by borrowing insanely cheap but seems like they are overpaying wherever they go.

MikeOH,
I'm in CA looking at properties and it I'd be ecstatic to see something out here that monthly gross cash flows 2% of acquisition cost. If I see something at 7% cap thats pretty good.

What kind of expense ratio are you using? Say 30-40% of gross rents to pay expenses? Or more or less?
I'm mainly looking at duplexes and triplexes.

And what do you mean by 30% equity at closing?

I'm thinking I need to look to Ohio or someplace, green looks greener over there! :D

Anyone have opinions on what they think is a typical fee structure (acquisition fee, asset management, property management, etc) / profit split on an apartment deal?

We are looking at class B/ class C properties, 4-20+ units

Say the managing entity puts in 10% equity in the deal...

[i]

Thats an interesting idea Bill. do you know of any good resources to see these les pendes filings? and arent there tons of agents and brokers looking for these properties so they gain listings?

Buying a note pre auction would be a v ideal situation for us.

Anyhow thanks for all the ideas guys and any other ideas are more than welcome :D

Now how does it work if the organization looking for financing is an LLC? Would the bank ask for credit and income statements from the people within the LLC? Or would the collateral be sufficient?

Or could one just refi the houses and pay cash for the improvement costs?

Yeh construction loans. A hard money lender would be something we'd not prefer.

So far I get the sense, that noone is giving construction loans these days at all, even if collateralized by the existing house.

Hi Steve,
Do you know of some lenders that would give out a home improvement loan to an investor?

We are currently all cash buyers of distressed single family houses. All of them need some degree of improvement, like landscape upgrades, carpet, paint, some appliance replacement...and generally looking to spend about 20% maybe 30% of purchase price on improvements.

Wondering if anyone has had any success getting financing for the improvements. We can use cash for them but obviously would prefer to get a loan to get more mileage out of our money.