All Forum Posts by: Mark Mosch

Also - there should be no uncertainty around things like the actual utility costs.  You can make an offer then get the actuals and they are what they are.  Your capex is fairly high too.  People usually use a $150-$250 per unit per year amount - with newer units being less expensive and older more.  Even at $250 - you are looking at $3000 per year for this, which is less than $300 per month.  You have $563.  While I think your analysis is very detailed on it, it is giving you higher numbers than people normally would use.  Lastly, there's no reason you should pay more than 5.25% on the loan.

Oh - and another possibility that i did with an 8-plex formed from 2 4-plexes that i had - was to finance each separately as a 4-plex and as a comforming loan.  You'd have 3 loans, but your rate should drop into the mid-4's.  I did that with Wells Fargo too, and they like Houston as a viable investment market.

Good luck.

Well, I can give you one thing to beware of - making the building look too good by packing it with short term tenants who leave after you buy. I have about 93 units now, but I am still trying to extricate myself from one bad 7 unit deal. That property looked tremendous on paper - although in a small town, I thought it was a decent area near oil services. It cash flowed out over 20% CoC at 10% vacancy rate, and it was 90% full. I bought it.

In the 6 months after closing, tenants left one by one.  Now I'm down to 25% full and going negative each month.  I did not do enough diligence around the overall vacancy rate for the town - relying too much on the listing broker's description of things.  Now I'm having to drop rents and scramble to fill it.  I think the moral of the story is if you are buying in a area you don't know intimately - which often has to happen in multi-family especially if you are in an expensive area like Southern California, New York, parts of Texas...etc... - then you need to be REALLY careful about checking historical vacancy rates for the property, checking the supply and demand situation for the area, and studying the leases carefully.

As my CPA tells me, 'if a deal seems too good to be true, it usually is.'  So - make sure on the multi-family side you do some serious diligence on the rental demand in the area before you jump in.  Getting something for a high cap rate is great, but oftentimes there's a reason why that high cap rate is there.  Best of luck...

Raising rent helps the top line on that equation - so all the things you can do that support that. i.e. Exterior painting, landscaping...etc.... Also internal improvements such as appliance upgrades, flooring, etc... You need to first check the market comparables to make sure that if you do these things the area will support the increased rents. If your property is already at the high end of the rent spectrum for that property class in that area then spending money won't help. But if you are in the middle and increased amenities would help, then you can look at the ROI of doing it. If you can recoup the cost via extra rent in 12-15 months, I'd go for it.

There's tons of money in the bigger properties - and I would suggest most bigger investors like those because there's lots of economies of scale.  All I'm doing any more is 8+ unit properties and making between 10% and 18% cash on cash.  The key is where.  A lot of markets are too over priced where you can't make any money - all the higher end ones like LA, NY, SF - parts of Chicago and the like.  So, you have to be looking in sub-markets where you can find those returns.  What you are saying above is you aren't finding deals that pencil out - which is true for 80-90% of most deals initially.  You should either expand beyond the closer in 'burbs there, or go to a different geography all together.  There's a lot of smaller metro areas that can get you very robust returns on those kind of properties.

I also have a great broker I used down there to acquire for me, then manage my 4-plex.  He has his own property management company and also his own investment properties - so he knows the drill.  Private message me and I'll send you his info.

Appreciate the referral, Nate.

Hey - thanks, Matt!

Looking to start up in Tulsa. I have a group of high net worth individuals who have raised funds for us to go after 2 or 3 buildings there in the 50-100 unit range. Can anyone recommend a good broker/brokerage firm who's familiar with that space? I'm not looking for someone used to selling SFR's trying to move up. Thanks!

and - important to do some overall market research on the market you are interested in.  If you go and register at CBRE, they have a huge research arm with free reports you can download that give you very detailed data on the apartment building markets - absorption rates, avg rents, avg $/unit for sales...etc...  Use that to find the most desirable areas, then start using LoopNet to figure out which properties within the target areas you should go after.

Actually, thank @Jeff Zimmerman - that was him.