All Forum Posts by: Jeff Greenberg

Commercial lenders use to put much more weight on the property and less on the borrower. That was before investors from high property value states took heloc's on thier homes (i know this is over simplified)and threw the money on income producing properties. This was done without the education or experience of property or asset management.

Most of the MF properties that were taken back by the banks, were from out of state investors. Why? Because the investor did not take care of business, and the PM either took care of the squeeky wheel on other properties or even ripped of the investor. Either way the property went down hill.

So what are the lenders looking for now. It does vary by lender, but in general, they do look at the property, but they want the borrower to have a networth equal to the loan and liquity equal to 10% of the loan. They also want experience with similar size properties.

The nice thing about CRE, is the ability to bring on a partner that may have the pieces that you are missing. This will cost you a piece of the pie, but a small piece is better than no piece.

Jason,

I agree that education is the key. I love buying property from uneducated people. The properties are usually run down, the rents are under market rates, and the owner is under stress.

The big question is where and how do you get educated. Even though I do feel there is value to a college or trade school education. It may not be for you, and it may not be the fastest way to an investment career. You can easily burn through your 15k going to seminars with gurus and still not be clear where to start.

Here is what I tell new investors. Find someone that is actually doing what you want to be doing and find a way to be of service to them. You may have to volunteer or be paid a low wage, but get into a position to learn the ropes. Don't just pick the first person that comes your way. Find some one that is really interested in helping you in return for your helping them. Don't expect anything for free, but it doesn't have to cost you cash.

Besides the education that you can get here on BP, look for an REI club that is there for education, not pushing programs. You may be able to find your mentor there.

Education is key.

Good Luck

We have a 20 unit out of state and the critical issue is the PM. We have gone through 2 before we got our current one and she is not perfect but she hits the key points. gets them leased up with good tenants, gets the money collected and gets the maint done. We are working on her paperwork.

At least with MF you can afford 3rd party management. We can lose 5 out of 20 tenants and still pay the bills. Yes it is worth the headache.

In order to continue a long career you must enjoy what you are doing. When you combine that with the potential for high and continuous returns, I think we all agree REI is a great path to persue.

Welcome to BP. It is a great place to start your education and education is the key. Learn all you can from this source and any other sources that you can find. Be weary of the gurus and get reliable references before you put any money down.

Once you are educated, there are ways to get into mf with limited funds of your own. You can always partner up with those that have the funds.

See my earlier post

https://www.biggerpockets.com/forums/432/topics/80942

Good luck

Ray Welcome to BP.

You do have another option. You are already heading toward multifamily(MF) properties, you just need to move toward the larger units. By doing this you can partner up with someone that can fill in some of the gaps in your financial resume.

When trying to get a commercial loan for mf properties, the lenders are looking for liquity, networth, experience and the asset. Income is not a primary factor. I see that you are in Austin which is a pretty tight market, but being on the ground can give you an advantage over others that are not local. You also have several other good markets within two hours.

My point is, if you are able to find good deals in some of these markets, there are other investors, including my company, that might be interested in partnering on the deal. Along with that could come the ability to get the loan and raise the money for the down and closing.

There are other ways to skin the cat. The key to being an investor is finding ways to solve an issue. Even the path you are going down can be solved with a w2 partner.

Jeff

Joe, Thank you for your service as well as others that have posted.

My take on out of town/state properties is this. You need to have someone on the ground that you can trust. This may be a PM or I hesitantly say a broker. With the larger MF properties you can afford a professional management company. With the sfr it is more difficult to get good management without digging deep into the profits. I personally would be very nervous about owning sfr from a distance. That said, I know many people doing it with trusted person on the ground.

If you decide to go into MF I recommend that you partner up with someone. Someone that compliments your skills and may fill in any weaknesses that you may have. I was glad to have a partner that I could trust when my dad passed. I was unable to function for several weeks and we were in the middle of a closing. If you want to talk about long distance, I am in California, my partner is in Alaska, and our properties are in Texas.

MF is a team sport and you need a team.

Good luck to you.

Jeff

Erik,

I won't fire away at you as I agree that MF are more susceptible to over building in some markets. My understanding of the Denver market is they can use more apartments as the demand is huge. The asking Cap rates look like my home state California.

At this point in the national recovery there has been no significant new MF construction for years. This has produced a pent up demand for more. The echo boomers are trying to start family's, and yes they would prefer to live in a sfr, many especially the lower end of the economic scale, will never be able to move to sfr.

We hear everyday about the erosion of the middle class, so we will continue to see the demand for inexpensive housing. As the shadow market (foreclosed inventory) is reduced the availability of good potential rentals will be reduced. Those that have them will be in a good position.

David brings up some good points. Legislation has made it more difficult to "create substantial wealth with a SFR portfolio", and "One MFR acquisition can bring a huge # of units at one time, versus the slog of buying SFRs." Professional management is also a key point. Being tied down with management cut out the time you have for new acquistions.

At some point everyone runs out of their own funds and in MF it is much more lucrative to bring in equity investors to fund the equity portion of the deal. You can even bring in an investor to help qualify for the loan and still have a fair piece of the pie for youself.

I understand starting out with sfr as it is easier to understand the ins and outs. The numbers are also easier to deal with. Everyone has to deal where their own comfort level, but if you are talking about leaving your 9-5, being financially independent, and not being tied down to another job, then in my book it is MF hands down. No problem hanging onto a few cashcow sfr, but the big money is in MF.

Jeff

Colby, As Harry stated this is a qualification to be considered an "accredited investor". This is an SEC term, which if an investor qualifies the amount of disclosure in a "private placement" (PP)is reduced. Non accredited investors can be included in an PP but the disclosure is increased and so is the risk to the sponsor(you).

There are other requirements involved with a PP and you should do further research. Google reg d exemption for a start.

Jeff

Robert Kiyosaki always writes about positive cash flow, and it is important factor. Callum said it well that there are other things to consider. I know an investor who bought an apartment complex with positive cashflow and a 1% cash on cash return. So instead of putting her money in a CD where she could beat the return, she took on the headaches of an apartment.

What is your end game? Do you plan on holding until the mortgage is paid off? There are many reasons to buy a property and you need to decide what yours is.