All Forum Posts by: Jordan Burnett

Personally I would be hesitant to invest in anything over 70% LTV at the moment, and that's also taking the going-in cap rate into consideration. I saw deals anywhere from 75-80+% LTV prior to the COVID-19 pandemic.

The agencies are being conservative and trying to avoid getting burned, but I would not be shocked to see sponsors coming out with low 4 or high 3 cap rates and 75+% LTV in the next few months to try and squeeze a deal in. This would likely be with bridge loans and not agency debt.

Yes. You need to consider what type of tenants you can accommodate with only 1BR units. Typically this will only be single individuals or couples (couples with no plans of having kids).

Also, consider the demographics and rent/SqFt for comps in your area. Some markets depend upon 2BR for a large portion of rent. Other markets can make a premium on 1BR units. 

If you have a comparable complex near you that makes all their money on 2BR/3BR units and their 1BR units are loss leaders or simply paying the bills, you may find yourself in a bind if you only have 1BR units to compete with. 

Also, consider the current economic climate. It's likely that more people will be splitting rent and if they're not a couple it's highly likely they'll want their own bedrooom/bathrooms. They won't get that economy of scale with a 1BR unit. 

If a 1BR is $900/month and a 2BR in a similar complex is $1500/month, two individuals that don't mind living together would highly prefer the $750/month payment split between them.

Yep, very interesting. Just like every other investment, you can niche down fairly well within the datacenter space. Most bigger operations operate with large cages and sell to single tenants (i.e. Amazon/Microsoft/FB). But, if you can build to serve lower-middle market you can service multiple tenants and operate it very similar to a multifamily building (in a sense). 

This isn't multifamily related but I'm personally a big fan of multi-tenant datacenters. Same model as multifamily (no single-tenant risk, no 100->0 occupancy). There are some big players in that space (i.e. QTS)  as it requires very skilled management (not a simple property manager) and a lot of money, but there is a lot of money to be made in the future by providing your tenants with better service and better amenities. 

It should be very easy to implement in today's world. Make sure you make an actual social media marketing deck (i.e. which fonts, colors, Canva templates/etc that you're permitting them to use). 

You should be able to allow the VA to either send you the content or schedule the content to automatically post via a scheduling app. You could then have a reviewal period (say 24 hours before it posts) to give it a thumbs up or thumbs down. That way you don't have a VA publishing something that you want taken down after the fact.

I second Scott's opinion. Talk to your residents and get their opinions as theirs will be the MOST relevant to your specific complex. Humans are quirky. You'd be surprised how many complaints and maintenance requests magically go away just because the pool in a complex happens to open instead of being closed down because of COVID (just one example). 

Also worth noting, it's likely not the fact that it's a Class A building. It's likely the fact that the rent is too high compared to the salaries in your area. It's worth examining the monthly rent of your units compared to the median rent of other units, and comparing the median and specific rent of your units to the median wage in the area. California may be different but you're usually looking for a specific multiple or percentage of monthly rent compared to income.

April, 

A lot of these education programs/clubs are not necessarily "scams" per se, they're simply a smarter way for those people to do business and market to customers. As others have indicated, true multifamily opportunities (i.e. above average) are not as plentiful as people wanting to get started in multifamily. So, it's easier for these folks to have a continual income stream from folks wanting to get started. 

From their perspective, if they have an investor club with a paywall, they can enforce some "standards" for their GPs and give newbie LPs some guardrails so that they don't get completely screwed. It also gives their GP members some qualified leads that understand the process and that will be more willing to fork over their capital (i.e. if the LPs have gone through training and understand how the investing works from start to end, they will not hassle the GP as much and will be a better passive investor). 

You can think about this as a marketing funnel with a paywall. This paywall takes advantage of a natural human psychological emotion called the Sunk Cost Fallacy. 

From Wikipedia:Sunk Cost

Hopefully this is used as a positive effect of the Sunk Cost Fallacy. Most people sit on their hands and never invest, so the $10,000 can motivate them to actually take action (kind of like paying $10,000 for mental coaching or whatever). 

You can see some more details here: How to Use The Sunk Cost Effect to Motivate Your Customers

The paywall makes it more likely that people will take action and actually invest. Folks who have committed $10,000 or whatever to join the club are significantly more likely to invest in a club deal than to do nothing (their thought is "I've already spent $10,000 to join so I had better at least invest in a deal with this group.")

If someone has zero experience whatsoever, this may be a good thing for them. That $10,000 could prevent them from investing with someone who will take or lose their entire $25-50K or whatever on their first deal.

 My personal bias is towards self-education and I don't think people should invest in things they don't understand. However, not everyone invests that way. Millions of folks pay 1.25+% of AUM in the traditional stock market/financial planning world just to be in an underlying index fund that charges .04%

Hi Nate, 

When you say decent commute--do you know where you'll be commuting to? 

Roswell, Alpharetta, and Johns Creek are all fairly close to GA-400 which will take you into Atlanta/Midtown but the traffic on GA-400 (pre-COVID) is horrendous. It can take 60+ minutes to go 10 miles. 

In Roswell/JC/Alpharetta you are likely not going to find a 4-5 bedroom in the 400K price range. New builds of 1BR/2BA are selling for 380-420K and some of the only homes selling for 380-420K are older 3BR/2BA that are <1600SQFT. 

New builds of 4-5 bedrooms are going for 600-700K+. Townhomes are somewhat cheaper but almost always come with an HOA which will have rental restrictions.

This area has great appreciation upside...but currently most folks in your price range (400K) are looking elsewhere to buy (Canton/Woodstock) or are renting here as rent is somewhat cheaper than buying. 

 I've spoken with my accountant--I know I'm definitely not optimized to take advantage of all the tax benefits, but I don't have a desire to be fully active and qualify as a QREP. Just curious if others have run into anything that snuck up on them and/or possibly reduced their after-tax returns significantly. 

I'm still evaluating returns on a pre-tax basis, and the advantage of leverage is obvious.

Hey Arn! Thanks for the input. I am totally fine with understanding that everyone's tax treatment will be different, but I'd still like to hear of some actual results even considering that there are obviously several assumptions built into their results. 

I'm mostly curious in comparing apples-to-apples with equities versus syndications. I see a lot of comparisons of the pre-tax returns, but everything gets fuzzy and few mention the after-tax returns of equities versus syndications. 

With equities, as long as they are held long enough to be considered long-term capital gains, you are fairly confident in what amount you'll be paying upon liquidation. Obviously one big benefit of syndications is that cashflow (similar to an equity dividend) will not be taxed until depreciation recapture, while qualified dividends from an equity can be taxed at the 0,15, or 20% rate. 

From what I understand, with syndications and depreciation recapture, assuming that you have no other tax benefits, you can end up paying a higher amount than the LT capital gains rate on your recaptured depreciation.