All Forum Posts by: Joel Florek

@Tony Kerzmann Not sure the size of the building or the stage at which you are in your project but depending on the system you install there are opportunities to reduce material cost in other areas. The challenge is this requires working very closing with suppression companies, architects, and local officials. Typically this type of investment only pays off in high rise type buildings.

If you were in the Michigan or Wisconsin I would be able to help as I sell a number of fire suppression products for my day job(primarily shipboard applications but I do have a number of commercial and industrial installations each year). Good luck though!

@Mark Kuster Ill PM you to get the conversation going. The marketing flyer that is on LoopNet for that 84 unit is extremely unreasonable as you mention. Until I get records from the owner of the property and get through more due diligence on issues like you mentioned I have budgeted $300k per building for renovations for a total of $600k to test the waters of what the financial performance might look like down the road. Haven't been in the building yet but there are some interesting circumstances with the owner that could make it an interesting deal if the price were to be lowered to the right level. While I have a general idea of where that level is I cant confirm until I have more concrete financial data.

@Zach Quick I use LoopNet, Trulia, Craigslist(don't usually find anything big), and then call listing agents and ask if there is anything else in the pipeline for new deals.

@Brian Rossiter If I were to pursue I would want to see all tenants be out of that building as a stipulation in the contract prior to closing to make sure I have no delays from people living in the building.

However, due to another offer on the property I am thinking this one will be best to pass on. The seller is moving quick and I wouldn't be able to have quotes in on everything in time to make an offer so would have to make some assumptions and that's a good way to get burnt badly.

I have an interesting deal that just came up on an 84 unit property that has 30 units gutted. 54 Units are being rented so there is still cash coming in. The units needing renovation are all on the first floor in each of the two buildings. All plumbing, windows, and electrical is completed. Needs insulation, drywall, kitchen, baths, flooring, paint and finishing. Am in the process of getting more information on this property and am excited to see what comes out of it. Given the sellers situation I forsee having some time to work through this in more detail.

I have some buddies that live a bit outside the city in Wauwatosa and that is seeing a lot of popularity. In my opinion, especially in Milwaukee its easy to get yourself into a non desirable area pretty quick. You can find 13Cap but your not going to be in a great area. While there are some areas of interest I haven't found anything that I get particularly excited about but I have my eyes on the area as well.

@Zach Quick I appreciate the concerns. Obviously there would need to be a lot of due diligence before I could close on something like this. Reaching out to a structural engineer is a good suggestion and I will do that later today.

I have already spoken with some contractors and that is where the suggestion came as rebuilding can run into a lot of issues on fire properties. Looking to see if people have contacts in that area or from people who have done a similar sized project.

Hello BP. Looking for some advice and contacts.

I have a lead on a 46 unit building. The story is that it has been underperforming for a while. Its two 23 unit buildings. A fire recently damaged the top floor of one of the buildings. As it stands, inspectors are saying its a complete gut on the 3rd floor(8 units) and needs a completely brand new roof including the trusses.

Financially the project could likely work if the total renovation costs stayed near $800k to rebuild 8 units, a new roof, and repair damage to some of the lower units. However, there is risk and $800k may not cover all the unknowns that will  pop up as the renovations continue.

To combat that I am thinking a solution would be to just rip off the top floor of the building and put the roof over the second floor. Given the units would only rent for $530 a month at most, paying $100 a foot for rehab and rebuilding doesn't make much sense to me. However, if I could spend $300k or less for a new roof over the second floor and repair lower units(flooring, painting, and potentially some drywall) then this project becomes a lot lest risky and still shows a similar financial upside.

The plan is that to buy the property with a valuation for 23 units that are functional and renting. Then spend construction costs to rip the 3rd floor off, clean up any issues and get 15 units back online for the cost of the construction.

I have to make an offer within the week so need some advice. If anyone has experience with something like this, knows contractors in the area, or other advice that may be helpful please reach out.

@Brian Himes A few notes for you that I hope will be helpful. Always happy to get on the phone and chat if you want. I have 20 units at the moment between two different buildings.

1. Unit mix. 2 bed 1 bath units are always ideal in my opinion. Its nice to have some good 1 bed's in the portfolio but typically your just going to get a couple or a single person in these units. That's not a problem but since that's all your tenants it makes things difficult.

2. Property features. Based on the pictures what is the draw for someone to want to live here? Are the backyards nice? In your renovations could you put some sort of low maintenance bushes and plants along the front to make it look like people aren't just living in an old motel. Also, how are the units? I can imagine these are the roomiest of units. If the units aren't finished well or functional you are likely going to have a lot of turnover.

3. Calculate your NOI. Multi is all about NOI and cap rates. Given this looks like a C class property I would assume a cap rate of 10%. At $400 a unit your potential rent is $48,000. Assuming the 50% rule(generally you find the NOI is between 40% and 60% of total potential rent) you have an NOI of $24k. Your valuation would be $240k if performing well.

With all that being said if you are comfortable with the tenant type that will be in the building, confident you can keep it rented you look like you will be just fine if you can get the property for $100k. This is assuming your renovations will only require $50k total. You stand to have a $90k upside if you execute well and probably $1k a month in cashflow.

@Steven Barros If it were me I would look for $1m to $2m multi family property that was underperforming but not needing major work. I would want to only tie up $200k in the deal at most. Over a period of 12months to 14 months I would transition it to being a performing and strong cash flow property. At that point I would look for a $2m to $3m property and do the same. Given you built equity in your first deal if you use the same bank you may not need to refinance given your portfolio debt to equity ratio. If possible hold everything and when you hit your freedom number let your management team do all the work and go sailing! You have big money, play big!

But if you don't have any experience I wouldn't just jump into something like that. I would probably start with a 8 to 16 unit deal and only tie up  $100k of your cash for that first property. This gives you experience at a large enough scale to understand the multi family game and give you credibility to get financing on larger deals down the road.

@Ayana Young @Alice K. @Ian Walsh Thank you very much! The first 4 months of owning the property are going ahead of plan so far so I am very pleased with the results thus far! Time to work on the next bigger deal!