All Forum Posts by: Greg Kasmer

@ Rita Naga - The lowest rates on long-term debt for multifamily is typically agency (Fannie and Freddie) loans, but come with a few stipulations, in particular high occupancy rate requirement (90%+), net worth equal to loan amount, and at least 2+ years experience. If the borrower doesn't qualify based on those criteria I've found credit unions to offer nearly same interest rates, but with less requirements. They can be more flexible, but to your point it certainly does help to have a relationship with them already. To me, there is no secret to finding a credit union with these loans, just start by googling them in your area and calling. I would ask for the commercial lending department/banker to get you started. Good luck!

@Jason Malabute

Congrats on your development as an underwriter! It's a skill that is always in demand. Sounds like you're getting the necessary "reps" in each week to further refine your approach. 

Another book I would recommend is "The Hands Off Investor" by Brian Burke. To me, it had many "rules of thumb" for underwriting that you wouldn't expect, but I found it to be quite useful. Keep it up!

@Lucas Miles Once again, congrats! You and your partner have a great project to take on! I think AJ touched on a lot of great questions for you to consider. It may make sense to think about the project in three phases: acquisition, renovation, and stabilization. Seems as though both of you were involved in acquisition (you identifying project and he helping to secure funding) and both will be involved in stabilization (i.e. asset management). However, what about renovation phase? As you know that can be involved and is often a stressful time so identify specifically who will (or won't be doing) during that time period will be important and may sway the equity split. Overall, to me, it seems as though 50/50 or something very close to 50/50 makes sense. You could also consider longer term impact of the relationship - if this relationship helps develops your business I may not worry about debating  5-10% equity right now - plus, you can always change the split for your next deal!

JC - Personally, I would try and identify WHY the building vacancy is high. If the submarket (market immediately around the building/property) has high occupancy and this particular property has lower occupancy then it's likely something about the building itself that is driving the dynamic. Then, you have to ask yourself whether you can address/fix it with you as the owner in order to drive up the occupancy. Conversely, if the sub market has very low occupancy it might be very difficult to correct the situation and assume a higher occupancy in a pro forma scenario. 

As for the value/price you offer I would think offering close to current NOI and cap rate would be the most ideal for you, but the seller might be influenced by the recent price/door in the area and just "expect" a similar price, although 25% of their units are vacant.

The biggest hurdle with the vacancy might be financing. Fannie/Freddie loans typically like to see 90% occupancy and I think local/portfolio lenders might want to see occupancy near that as well. Perhaps a bridge lender would be more inclined to finance as long as you had a strong business plan. 

Good luck!

Sterling - I think you have plenty of options at your disposal to get involved with a multi-family property. There is probably not a "right" or "wrong" way to go about it, but the best that is best for you based on how much you want to be involved in the multi-family and your goals. 

Some ideas:

- Partner up with someone locally in your area to purchase a multifamily actively together. Together you can form a partnership or JV to work on the deal together and split the tasks/responsibilities. However, make sure you have matching skill sets that compliment each other... and the same/similar goals.

- Invest some/all of your funds as a passive investor in someone else's deal. This will get your exposure to the process and also allow you to see how others actively invest. Additionally, you should be able to ask questions of the active investors/operators. 

- If you invest some of your funds as a passive investor you may be more apt to invest actively once you know the process and have more confidence. 

Hopefully this gives you some ideas. Good luck!

Greg 

K4 Real Estate LLC

Marjorie - I agree with the replys that speak to the difference in commercial and residential lending. Because your opportunity is 5+ units the commercial side of a bank/broker will likely be involved. I've found that for deals that fall below the $1M-$3M range (Fannie Mac SBL), but are still 5+ units some credit unions (portfolio lenders) are an option to consider. From my experience they typically look for about 20% down payment and have rates close to the Fannie Mac SBL - and some may even be able to finance some renovation costs if needed/wanted. They also typically require less reserves on closing and reasonable closing costs. On the downside, they are harder to find (They rarely have "brokers) and you typically have to call around to many credit unions to find one that works for your project. Good Luck! 

I think the most "intense" aspect of a syndication deal is the last 30-45 days before closing as well as the next 30-45 days after closing. Prior to closing, you're interaction with many of your team members; GPs, LPs, attorneys, property managers, etc.. ensuring everything is lined up as best as can. After closing starts the "roll up your sleeves" work with renovation and execution of the business plan, especially for value add or repositioning opportunities. 

Of course, the hardest part may vary depending upon the deal, but I think immediately before and after the closing are when many moving parts are in play.