All Forum Posts by: Arn Cenedella

@Liam Alvarez

Thank you. 
Hopefully your local market is growing - population and jobs increasing. Some vitality and growth. Capital being invested in your area. 

If so invest locally, gain experience and knowledge, scale up and go from there. 

People have made fortunes investing in NYC and SF. Neither of which would be on anyone’s best market list. 

Good luck. Let us know how it goes. 

Arn

@Liam Alvarez

I’ll be a contrarian here.

After 46 years in the industry, both as a SFR broker & investor and now as a MF operator with over 1000 units as a general partner…..

The best market to invest in is the market YOU KNOW BEST.

(I don't do STR deals so my comments are more about long term buy and hold residential RE.)

Data by its nature is historical - it’s a lagging indicator.
4 years ago the Southeast was the place to be. Now it’s probably the Midwest,

But my the time you get to the Midwest and establish a footprint and “street credibility” with the brokers and sellers another market may be strong.

If you are going to invest out of area, you will need to spend “face to face” “boots on the ground time” there. So pick a market that is easily and readily accessible to you. If your chosen market requires 2 or 3 flights with layovers, you probably won’t have the time or desire to get on the ground as often as you like. Pick an area that is within a 2 hour drive or a 3 hour nonstop plane flight.

Get in that market and really learn it neighborhood by neighborhood block by block.

Local market knowledge is every investor’s competitive advantage.

I do MF deals in Greenville SC where I live and already own 400 doors. I know the market from first hand experience.

Dallas Ft Worth is a fabulous market, all the data says so. But I won’t do to DFW because I don’t know the market and the players like people who have invested 10 years there. The brokers there have their buyer pool there. The only way I would ever win a MF deal in DFW would be to overpay - I wouldn’t understand the sub market like the locals do.

Pick one or two markets you can get to easily. Drill down in those markets.

Hope this makes some sense.

Arn

@Michael Kaminski

Sadly there is No ONE answer to your question.

Math isn’t going to give you the answer because the answer depends on the future which is unknown.

Is the duplex going to appreciate more in the future than the forever home you buy?

That’s unknown. 🤷‍♂️

Sounds like you have seen a property you might like to buy and perhaps sell your existing one to acquire.

This also seems to involve not only investment decisions but also lifestyle aspects ie forever home. 
How does one quantify the value of a forever home to your family and you?

Can you somehow buy the forever home without selling the duplex?

You can look at the math but at the end of the day, after 46 years in the RE imdistry, this seems to me to be more an emotional lifestyle decision.

@Tyler Gilpin

Each HUD office in every County publishes FMR ( Fair Market Rent ) reports each year.

Just google Name of Counit HUD FMR and it should pop up.

You might have to dig around to find it.

Or call the local HUD office and they will point you in the right direction

@Stuart Udis

Thank you for the clarification. 
I understand what you are saying. 

At Spark Investment Group, we do smaller 506b syndications with a typical $25,000 minimum with capital raises typically in the range of $1.5M to $3M. 

That being said ( and I will be interested to hear from some of the larger syndication groups ), I have found larger check writers (family offices hedge funds pref equity groups etc) often want some element of control and higher returns for their investment and so perhaps that is why larger operators accept smaller checks too. 

As you note, there are good large syndicators and there can also be bad small syndicators, so it’s also a case by case evaluation. 

Thank you

Arn

@Jonathan Greene

Lots of great ways to invest in real estate.

The decision of active v passive comes down to how time, expensive, knowledge and capital an investor has. 

One size does not fit all. 

@Stuart Udis

Sorry I’m a little confused as to your point. 

Are you saying smaller check writing passive investors should invest in smaller syndication deals or larger ones?

Does 506b v 506c enter into your thinking?

Just want to make sure I understand the point you are trying to make. 

Thank you

Arn

@Laura Casner

If I may provide a different perspective………

I don’t go into a partnership with people I don’t already know.

It’s a recipe for disaster, an accident waiting to happen.

If you don’t already know the partner, how do you know his or her values, character, and integrity? if someone would “go around you” to take the deal, trust me, you don’t want them as a partner.

Partnerships can be difficult and need to be formed slowly and carefully.

I’d say find the partner before finding the property.

If you can’t trust your potential partner, it doesn’t really matter what any legal document says. In 46 years years in the industry, I’ve learned if one needs to get an attorney to enforce a document, everybody has already lost.

Say you get an NDA signed, and then your potential partner likes the deal, then you must form a formal partnership or ownership agreement - both you and the cash investor partner - would need to agree to the terms. Do you believe the cash partner will let you have control of the deal? I don’t. What then happens if you can’t agree on the terms of the partnership?    Do you negotiate the terms of the partnership before the NDA?

Even with an NDA signed by Sally, what’s to stop Sally from telling Jennifer about the deal? Jennifer buys it, then what’s your recourse? Are you going to retain an attorney and spend $50,000 $100,000 trying to prove your case? It appears you can’t bring the deal down by yourself, so it seems to me there is some risk to you no matter how you proceed. My response would be, if you can’t bring down the deal yourself, what’s to lose?

I can tell you as an investor with over 1000 units, I have NEVER gone around someone who brought me the deal. I’m not Mother Theresa but rather I understand it would not be in my long term interest to do so as I want that other person to bring me other deals in the future.

Your profile indicates “new to real estate” which is fine. We all started as newbies at one point. I’d say don’t be fearful, try to find a partner for the deal, but really pay attention to the vibes - is this someone you can work with long term? And hey if someone goes around you, it’s a learning experience and you move on wiser for the experience - not the end of the world, there will be other deals.

I just don’t think an NDA will offer you much protection against a more experienced more wealthy investor.

If the deal is really good, you could just wholesale it and make yourself $50,000 to $100,000 to provide capital for the next deal.

Good luck,

Arn

Agreed. 
We have closed on last three acquisitions with local credit unions here in Greenville SC. 
Loan amounts between $2M and $4M. 
Got some IO and also 30 year amortization for some of the BTR product we have acquired. 

@Karolina Powell

I second @Charles Seaman comments.

I would add since you own other rental property in the area, you probably have a good grasp of rental rates as well as expenses in the area. You should have a clear understanding of property tax rates, insurance costs, repair costs, utilities, landscaping etc.

Any buyer must develop their own proforma and that is what should be relied on. The seller data is useful but it must be evaluated within the context of your own investing knowledge and experience.

A local property manager who manages similar assets can also provide useful data.

Use your local market knowledge and experience to develop a proforma you feel confident in and proceed from there.

Arn