All Forum Posts by: Jill F.

@Don Konipol Hi Don, At the point where I am in my business, I am thinking (a lot) about improving and growing my business and profits. I'm not thinking of 'scaling' my business by becoming a 'passive investor' in someone else's business.

I've seen a lot of your posts and I'd be interested to know what you think differentiates those 'few' investors that do manage to scale their businesses from the 'most investors' that are unable to achieve a gross ROI that would generate acceptable profits for a sponsor and investors? Assuming that they aren't simply lucky in market timing, excessive in leverage, or excessively risky, why do you think that some companies and leaders ARE able to duplicate the ROI driving expertise and/or improve personal-business productivity in a way that allows scalability? What do you think they do differently?

Also, What do you consider growing to a moderate size?

The younger you can start, the better.

Our bank will let us use equity that exceeds 25% across multiple properties that are either owned free and clear or where they hold the first so long as the deal still cash flows with however much cash is brought to the table.

The Title company not the seller should be holding the earnest money and in Ohio, one important buyer protection is that the buyer always has the right to select the title company. Have you talked to the title company that is holding the money in escrow and ask them what they need to have happen in order to release your funds?

How long is his lease? Why don't you just non-renew him at the end of the term?

Quote from @V.G Jason:

Quote from @Jill F.:

I hope you're right and I hope rates go down some! It's been disappointing when the fed cuts caused increases in the 5yr rate (that our dscr loans are tied to). The last few years we've just been nickel and dime-ing it--  picking up small value add add-ons near existing properties and recently did a "trade-up" 1031 exchange sale/purchase for a newer/better neighborhood property with one less but larger higher rent units.

Here in mid-west flyover country, rents are still creeping up and almost all the development has been luxury rentals (mostly by Redwood). Since 2020 we've seen large asset value increases and large tax increases, and more modest insurance increases but we've been able to improve our profit margins sufficiently to keep up with inflation and even do a little better in many cases. We don't see the level of demand that we had in 2021, but we haven't had much turnover, and we've rented quickly each time we've gone to market.

Next year, we'd really like to cash-out refi or 1031 exchange some high equity properties and buy our first (large for us) 30-50 unit (1978+) multi-family.

Financing is different down here in small investor world. Most of our loans are fully amortized and those that aren't, are 10 year balloons where we'll have more than 50% equity (at the purchase price) upon loan maturity in 2030+. 

In our market, even 6.5% would make cash flowing deals possible for us at purchase (with rent increases to market). I'm researching/looking into Freddie/Fannie financing for large multi-family now. Any thoughts/advice for small investors trying to get into larger properties?

Consolidation. Goes back to that original thesis in a thread long time ago-- quality over quantity. Quit nickel and dime'ing it, put more money in better/bigger deals. Better and bigger are not synonymous, better and quality are. 

 
Everything you said is exactly why-- debt levels, market demand, associated costs(taxes & insurance). Quality over quantity. 

If you can take 8 properties and move them to 3 bigger & better one's great, I would push you further and say take it to 2 even better one's. 

 TY for responding. I see that I wasn't clear in my description of our current situation and our goals.  By nickel and dime-ing it I did not mean we were buying cheap or low quality properties, I meant we were adding properties as they became available in neighborhoods where we were already invested. We started out buying groups of duplexes.

Now that we have significant equity positions in renovated, stable properties, we want to move into even better neighborhoods with better schools and we'd like to scale our business by purchasing newer and larger multi-family properties (rather than groups of duplexes). I recently learned that Fannie and Freddie offer financing that wasn't available to us for smaller purchases and I'd now like to pursue larger deals with this type of non-recourse financing. 

I hope you're right and I hope rates go down some! It's been disappointing when the fed cuts caused increases in the 5yr rate (that our dscr loans are tied to). The last few years we've just been nickel and dime-ing it--  picking up small value add add-ons near existing properties and recently did a "trade-up" 1031 exchange sale/purchase for a newer/better neighborhood property with one less but larger higher rent units.

Here in mid-west flyover country, rents are still creeping up and almost all the development has been luxury rentals (mostly by Redwood). Since 2020 we've seen large asset value increases and large tax increases, and more modest insurance increases but we've been able to improve our profit margins sufficiently to keep up with inflation and even do a little better in many cases. We don't see the level of demand that we had in 2021, but we haven't had much turnover, and we've rented quickly each time we've gone to market.

Next year, we'd really like to cash-out refi or 1031 exchange some high equity properties and buy our first (large for us) 30-50 unit (1978+) multi-family.

Financing is different down here in small investor world. Most of our loans are fully amortized and those that aren't, are 10 year balloons where we'll have more than 50% equity (at the purchase price) upon loan maturity in 2030+. 

In our market, even 6.5% would make cash flowing deals possible for us at purchase (with rent increases to market). I'm researching/looking into Freddie/Fannie financing for large multi-family now. Any thoughts/advice for small investors trying to get into larger properties?

Pass for me. It took me a while to find a great commercial agent to work with but that relationship has really paid off for me.  I am focused on growing and running my rental business while my agent is focused on buying and selling commercial real estate. Perhaps I would have gone that route if I had started younger...

Our son is a partner in our business. He recently married. All of our properties are held in LLC's where the operating agreements allow non-members to inherit a financial interest in the company but non-members are not allowed voting or decision making rights unless they are unanimously admitted as a member. Our son's financial decisions regarding his assets as they relate to his marriage are his alone to make. Should he and his wife ever divorce, they will have to figure out for themselves how to divide their marital assets. I feel good about how our company leadership is protected and our son's ability to provide for his wife should he pass before her.

I'm about to use about that much to buy me a nice little 6 unit.