All Forum Posts by: Joseph Cacciapaglia

@Jovany Espinoza San Antonio is an excellent market. Out of state investors come here from all over the country, because of our market's strong fundamentals. I represent a lot of investors in this market, and am actively buying deals here as well. It is very competitive at the moment, but if you can manage to win deals, I expect you'll do well here long term.

One question you have to be able to answer, before picking a market, is what your goals are. If you are trying to get large cash on cash returns in year 1, then this may not be the place to invest. If you're interested in strong total returns, without having to endure negative cash flows in the short run, then I don't think you'll find a better market. If you are one of those rent growth and appreciation deniers, then you may need to look elsewhere.

I'm working on a couple of shipping container home projects now, and both will be for short term rental. Figuring out if you can build a shipping container home on a given lot, especially as a guest house, can be tricky in many locations. I would check with your municipality directly, and also consult an architect and real estate attorney during your due diligence process. 

There are several layers of rules that could be a problem. First you have to check that the zoning allows both a second home and a small structure. Some jurisdictions limit the minimum size a structure and/or a room can be. This caused me some issues. The city was my main source for this info, but I know in other areas you would need a real estate attorney to help navigate this, if the city isn't as helpful as San Antonio is.

Second, you have to check the local building codes. I've found that the code itself makes building shipping container homes difficult in some areas. You may already have a handle on this.

Third, you have to be sure there are no deed restrictions or covenants that prevent it. I ran into this in one deal. There are often restrictions in prior deeds that require certain materials to be used on the facade or that require the structure be a certain minimum size. You won't find out about these until you run a title search. I would not count on the title company to advise you on this either. Ask for the source documents, and either review them yourself or hire an attorney to do so.

Both the zoning and restrictions may also dictate minimum setbacks. These can make it impractical to build a second structure, even if one is allowed. These should show up on your survey. In my area we have a standard place in our contract to deal with contingencies for all of these issues, but that's not the case everywhere I've worked. You'll want to be sure you have outs in your contract for any of these issues that may arise during due diligence.

@Tim Park there is a lot to talk about here. I've attempted to answer a few of your questions below. Also, I'm not sure I would recommend going with a single property, but I also would skip past the 4-8 unit properties if I were in your shoes. I would focus on properties in the $1.8MM+ range, because that will ensure their large enough for agency debt. In San Antonio, that means starting with15-25 unit properties, give or take.

1. Explore target markets

1. I have family in Aurora, CO and San Antonio, TX that know those areas fairly well so am considering starting with one of those two.
2. I will probably end up having a separate post with questions about exploring my target market.

2. Find a mortgage broker, real estate attorney, escrow officer, accountant, insurance agent, contractor, realtor, property manager, and handyman

1. This list was taken from the BP ultimate beginner's guide. Is it exhaustive? On the flip side, are any of those team members superfluous? When you get into the larger multifamily properties, there often isn't room in the transaction for a buyer's agent. So, depending on how large you decide to go, you may not have your own realtor. You may just be dealing with the listing agent. In San Antonio, the cutoff is around 30 units +-. Most listing agents with properties that size and below don't seem to mind you bringing your own agent to the deal. This varies greatly by market.
2. For each team member: do I need to find one local to my target market? Or does location not matter? (I assume most of these should be local to the market) Your agent, property manager, and contractors need to be local. Your attorney, accountant, and insurance agent should at least be in the same state. The lender can be anywhere, especially if your deals are large enough for agency debt, which it sounds like they will be.
3. For each team member: How do I go about finding someone beyond just searching on Yelp (or, is Yelp actually pretty good for this)? Networking in investing clubs? Networking on BiggerPockets? Yelp would be the last place I looked. I would use the BP search function, and referrals.
4. Is it necessary to assemble a team before moving on to any of the next steps? That depends on what you think the next step is. I would suggest talking to an agent in whichever market you choose, and asking for recommendations for the other team members. If you decide on San Antonio, I'm happy to share my favorite attorney, CPA, mgmt company, and lender.

3. Incorporation

1. Is this something that should be done for a property of the size that I'm looking for? Can I rely on a good attorney to guide me through this? Your lender is going to dictate this to a certain extent. It's often a requirement that you form a new single purpose bankruptcy remote entity for each property. Any decent real estate attorney should be able to assist with this.

4. Find a property

1. Do I just wait for the realtor to suggest buying opportunities to me? Is LoopNet the go-to resources for quickly searching for these kinds of properties? This is very market dependant. Here in San Antonio, we see a lot of the smaller multifamily deals trade on the MLS. This is unheard of in many other areas. Loopnet and CREXi both have a decent amount of volume here too.
2. I will probably end up having a separate post with questions about evaluating a property.

5. ??? (I feel like there should be more steps here but I don't know what they are)

6. Close the deal

1. Can I rely on a good realtor to walk me through this process? Don't just rely on your agent, but if you have a full team, you should be fine. There will be a lot of steps that dictated more by your lender than your agent. The title company and your attorney will also have their own roles to play.

7. Find tenants

1. Can I rely on a good property manager to handle the bulk of this, or should I be handling most of this myself? Yes. This should be handled 100% by your property mangement team.

8. Ongoing maintenance

1. Can I rely on a good property manager to handle the bulk of this, or should I be handling most of this myself? Yes. Your property management team should either have a strong in-house capability or a strong vendor network. They should check with you for certain expenses, but should be able to handle 100% of the coordination. Finding a property managment company, as opposed to an individual, is key with multifamily properties. You want a company with full and separate maintenance, leasing, and accounting departments. If the same person is handling more than one of these functions, you're probably dealing with too small a company for this type of property.

@Kyle Varga Wow, $2,545? You must have done a great remodel, because that's a premium rent here in San Antonio.

I spent a good portion of my career in Philadelphia, but moved to San Antonio, TX a few years ago. I know a lot of people that have made a similar move in the last couple years, and this past year seemed to accelerate that trend. I think in general people are expecting a shift away from the densest cities, which would include Philly. I still own one rental property in Palmyra, NJ, and I know a bunch of people have moved out of the city to the suburbs too.

I used http://www.lawofficeofmichaelv... to set up my series LLC for investing in San Antonio, TX. As a former attorney myself, I'm somewhat picky when it comes to lawyers. I find he provides the right combination of expertise and reasonable rates for residential real estate investing.

I think this one is tough, because it has a huge HOA. I discussed it with a few clients, and none of them could make it work for that reason. In general you can get about 0.8%+- rent to price ratios on decent fourplexes here, depending on where you draw the line on decent. Anytime you're getting close to 1%, like on this one, you should look really hard to find the catch.

For cash out refi's, you're going to be limited to 70% for any of the lenders I'm aware of in San Antonio right now. If you're doing a rate and term refi out of the HML, then 75% is achievable. Have you tried getting a pre-approval at a lower LTV already?

I bought my first duplex the summer between college and graduate school, back in 2005 when you could use income from a summer internship to qualify for a mortgage. I lived in one side with a roommate and rented out the other side. I used a VA loan and used some rebates to actually get cash at closing. While I lived there, it basically broke even. I moved out a year and a half later, and with the rent increases, it cash flowed rather nicely. I sold it for a decent profit in 2009. The ROI was off the charts, because I put zero dollars into the deal.

FYI, at the time interest rates were 6.5%, and I thought that was a great rate. There were certainly challenges, but I wish I had been able to buy 10 more at that time.

If you are just starting out, I wouldn't worry about the 10 loan limit, unless you have the capital and time to buy 10 properties this quarter. The 10 loan limit is something that a lot of new investors seem to worry about, but rarely becomes an issue for most of them in practice. Once you've started to build a portfolio, there are plenty of options for portfolio financing and/or trading up. 

I've seen this question a ton of times from people with 0-2 properties, but don't remember the last time I heard anyone with 9-10 properties ask about it. One of the things a lot of new investors do is avoid starting because they can imagine some problem very far down the road. I would just focus on finding deals that work for you right now, and then adjust down the road if capital actually becomes an issue.