All Forum Posts by: Arn Cenedella

@Michael Bishay

Your question is too broad to provide any meaningful answer. There are lots of good markets to invest in. The best market for you depends on many factors including your investing goals, location, and available time. Self manage or 3rd party manage? What is most important to you? Cash flow or equity growth? Obviously we all want both but typically an investor favors one over the other. 

$300,000 will be enough to perhaps purchase up to about $1.2M. 

Pending market, this could purchase you anywhere from 4 to say 20 units. 

$60K a door usually means rough property, neighborhood and or tenants. Personally not my cup of tea.

I would look for good areas where small multifamily units go for $125K to $150K a door. 

So $1.2M means about 8 to 10 units in a decent area. 

I would encourage you to investigate perhaps 10 markets and narrow the list down to 2 or 3 markets and then really drill deep. 

The 45 day identification period comes quickly. So I would try to identify your markets before you put the AirBNB on the market. By the time your existing property goes on market, it would be best to know the markets you focus on. 

Good luck! Narrow the search. Drill down. 

@James Wesley

Another way to phrase your question would be:

What’s my yield on cost?

Purchase price + closing costs + cap ex equals all in total cost. 

Gross rental income after renovation less operating expenses equals net operating after renovation. 

NOI after renovation/all in total cost equals yield.

The yield will give you a solid idea of the value of the potential deal. 

If market cap rate is 6% for stabilized assets in your market in my mind to do a BRRR aka value add program when you are finished you would probably want a yield on cost of at least 8%.

Hopes this provides another perspective to frame your question. 

@Jorge Abreu

💯 to your post. 

My only addition would be:

While the documentation is important, what’s on a piece of paper is less important than the character integrity and commitment of the individuals involved. It’s the commitment to the team that is most critical. The willingness to carry one’s own weight. 

While the terms of a legal agreement may be enforceable - they are generally only enforceable thru a court of law or perhaps arbitration. In my decades in the industry once one moves from voluntary cooperation to legal action, everyone loses even if they are “right”.

To be clear the written agreement is important no doubt but it’s not easy or inexpensive to enforce the terms of an agreement if the other party refuses to honor their commitment. 

All of which speaks to the critical importance of selecting the right partners - to do a test run so to speak before “getting married”.

Create a structure for one deal and if the partnership doesn’t work out, one can easily exit without too much damage and move on. Or cut your losses buy the other person out and save yourself lots of emotional and mental energy. 

Go slow choose wisely. 

@Alexander Rovsek

The prior comments are correct about the time of year and its impact on leasing velocity. Price is also critical. We just had a unit at $1500 no activity. We dropped to $1400 and it rented in two days. 

My initial reaction to your post was: Are these properties located in a less desirable rough neighborhood? Have you been to the property yourself?

We buy a lot of new BTR product and with a large number of vacant units we offer $300 to $500 first months rent discount if tenants rent within 48 hours of first seeing the unit. It provides a sense of urgency to the prospective tenant to make a decision and apply. 

If the area is decent and the units in clean nest rent ready condition, the problem is most certainly price. 

Look for local smaller banks and or credit unions in your immediate area. These local lenders tend to like doing smaller multifamily loans. 

Reonomy is another option. 

@Joseph S.

All three firms listed are well established large firms with good track records. 

As with prettY much all commercial real estate firms and investments, future returns may not match the BOOM period - the golden age of MF - from say 2018 to 2022. That being said, solid returns can still be earned in this space. Investors just need to adjust expectations a tad. 

We have similar investment perspectives - long term equity growth over cash flow. 

We are currently acquiring small new build multifamily BTR projects that fit perfectly with a long term net worth growth mindset. 

@Marcus Gaethke

A questionnaire is a good idea. 
There are no “black and white” guidelines on what constitutes “sophisticated”.

As an operator who almost exclusively does 506b deals, I try to assess the investor’s overall financial situation. 

Here are some areas of interest to me:

Is their financial house in order? Do they have savings or other investments? What is their credit score? Do they have 6 months of monthly expenses put away for a “rainy day”? Do they have capital above and beyond this rainy day fund to invest? Can they safely invest say $50,000 knowing they won’t get the money back for 5 years? Whats their income and job stability?

One also needs to discuss what the potential investor’s goals are? And determine whether your deal is suitable for them? What’s their tolerance for risk? Do they want to aim for a grand slam and could afford to lose their investment? Or do they just want a 8% to 10% return and safety is primary?

The needs of a 40 year entering their peak earning period are far different than a 60 year looking to “retire”. 

Does it make sense for the investor to invest? Is it logical and appropriate?

A couple rules of thumb (in my opinion):

No one should invest maybe more than 5% to 10% of their net worth in ANY deal. First time syndication investors should only put a few chips into the pot in their first couple of deals. One should not go ALL IN. 

Most operators also have a 30 day wait period before offering any specific investment. 

So there is a cadence to 506b. 

Intro phone call - get to know each other. 

Provide educational resources to investor about syndication investment - these could be your own material or marital produced by others - blog posts podcasts etc. 

Follow up phone call to answer questions after investor does some research on the topic. 

This all takes time.

Them and only then present a specific deal. 

Trust me as an operator you don’t want investors who don’t understand how it works. You don’t want investors who will call you a year into the deal and say I need my money back. 

Go slow - don’t ask for money - just share what you are doing with others. Trust me many will say tell me more. They will self identify their interest. And then go thru the steps and make sure a syndication investment is right for them. 

Good luck. 

@Siraj Alsafar

Your post is interesting because it starts singing the praises of Florida as an investment market and then you transition to Alaska. 

Florida is about as far from Alaska as one can be and still be in the US. 

I don’t see it as a practical investment option and I have doubts about a 13% cap rate. Sorry my experience just says there is a math error some where. 

Since you are just getting started out and you live and work there and you sell real estate in Florida, it seems to me Florida should be your market. 

Presumably you know the Florida market better than Alaska and your potential clients which I would say our probably your brokerage clients would feel better invest closer to home. 

Buy something with an hour or two of where you live and gain some experience. 

Don’t let numbers on PAPER seduce you into making a big mistake. 

@Jaryn Pierson

I also find you get pretty good quality tenants. 

Consider a 1 bedroom that rents for $900 versus a 2 bedroom that rents for $1200. 

Which tenants or tenants will probably have a higher income and perhaps more job stability?

A single who pays $900

Or 

Two room mates that can’t afford to pay $900 by themselves so they “room mate” and each pay $600?

Which is a more stable tenancy?

Two room mates that may have issues about how clean the apartment needs to be or what time should become quiet time or a single that doesn’t have to negotiate with others about living arrangements?