All Forum Posts by: Joe Smith

Well, wouldn't it cost more to let someone live rent-free and pay them to be a "maintenance man" than it would to pay 6 - 10% of gross rents to a company and just let them handle it?

Considering that half the 10 - 30 unit properties I know of around here are owned by people or companies based 100 miles away, I can't imagine they're all self-managed.

If johnny is right, I will scrap the idea. I work full time as it is.

Well, I need to unload a couple of my duplexes first and raise some cash...but I may take you up on that later this yr.

What about resident managers? Can a mgt. co also provide that part? Do they get a salary or just free room and board?

I presume that I can remain a passive investor in multifamily...are management fees similar percentagewise to SFR and 2-4 unit?

Also, if a building is of he size that it needs a resident manager, can I have a management company take care of that, so I can avoid the hassle of hiring actual W2 employees?? And...does that increase or decrease management fees?

My thought about a local bank was mainly to have access to smaller loans...under 500k type stuff.

So, much like for <=4 units, its good to have both a decent commercial mortgage broker and a small, local bank or two to discuss with for each potential property?

I wouldnt buy my example at that price either...it was just one I knew about.

What I have seen thouh are lenders giving different rates for different class. It sounds like each lender will treat class differently.

Hi - I have experience in SFR and 2 unit properties and am looking to delve into larger 5+ MF.

How do you determine if a property is Class A, B etc?

Examples: I presume a Class A would be a 110 unit, higher-end property with onsite excercise room, underground parking, large apartments, newer construction or rehab, etc, in an "important" market like, Chicago.

Is there a size/number of units restriction?

But what about others? Is a city like Cleveland unable to have a Class A? What about a smaller market like Canton, Ohio?

Here is a specific example - this one isn't for sale but I know the owner. A 20-unit, single building, with 1BR units that rent for $400 - $500 per month. There is parking, but no real amenities besides a laundry room. Units are clean, well maintained, and functional, but low-end. Property is not that old, built in 1990. Worth maybe $600k but according to the owner the cap rate is around 9% based on that value.

Is that a Class B or Class C? Or does that fall outside that description due to the small nature of the property?

What about something in a Cleveland suburb with 25 units that rents for $600/mo per unit, built in the mid 90s, well maintaned, with free wi-fi, good (but uncovered) parking, in-unit laundry? Say it just sold for $1.25M?

Still a C, or would that maybe meet "B" criteria?

How about the many old, 5-10 unit buildings that are under $300k in these markets?

From the research I've done, it seems there is a frenzy in the "big" markets like LA, NYC, etc that has pushed cap rates on fancy Class A buildings to ridiculously low levels, while the "secondary" and "tertiary" markets have far better deals out there if you really want to make cashflow.

This seems odd to me. Why is there this frenzy in the big cities, when, as soon as rates go up, all these 4.5% cap rates will suddenly be in a situation where either the investor has to sell at fire-sale prices, or, rents would have to increase considerably?

To me (someone who has only invested in SFR and Duplexes so far) this seems like a warning siren to stay away from the big markets.

I don't see rents increasing at a rate that will make these big city buildings profitable down the road, unless these new buyers take a bath on them at some point...am I right??

It seems to me that you make more dough cashflow wise on 5 $850k 20 unit Class B or C buildings in Akron, Ohio than on one 10 million dollar Class A in New York (if such a thing even existed at that price).

FYI the other area of concern would be if I did manage to cashflow enough to retire despite the mortgage obligations, if I'd be unable to get refinanced if I didn't personally have a job outside the rentals...or is that less of an issue w/commercial lending?