All Forum Posts by: Brandt Tingen

I am looking to owner occupy a multifamily in the DC area, but Ideally I don't want to put 20% down (property will be in the 500-700 range so that's a lot of cash) and I don't want to have PMI messing up my profitability... I know I know I'm asking for my cake and to eat it too!

Reason I am throwing this out there is that I have heard through the grapevine of 5% down options with either lender paid or lender financed mortgage insurance. I know the i% rate may be a little higher and you may have to put some points towards it to get it down, but still probably a better option than FHA if I can find it.

Any Ideas?

@Roger Lin Hey Roger, I just requested your FB group.  If you could add me to your mailing list that would be awesome.  Looking forward to your next event.  My email is [email protected]

@Kevin Barbera Hi Kevin, How is the multifamily search going?  I have been looking on the open market for a multifamily for almost 6 months.  I have found a few marginal deals (one in petworth that didn't even meet the 1% rule) and a bunch in DC that look like total nightmares.  They are still getting purchased though because deals here are so scarce.  I have come to the conclusion that this is a waste of time searching for deals on the open market, and that before you get into the multifamily business, you need to get educated to become credible, start a relationship building business with the players in the area, and a start a marketing business that directly reaches out to the owners of these properties - to break bread with them and share your goals.  If this is of interest to you then drop me a line and we can talk offline about plans for 2015, my contact info is in my subject line.

Also, you brought up a very interesting point on value-add SFH & shares. I am looking into buying some 3 or 4 level TH's in Centreville, Ashburn, etc., where I can convert the lower level into a proper English basement. I've found that 3/3s are rare, but they are perfect for this. You know this area - a nicer separate entrance lower level 1/1 apartment could fetch $1100-1250 or more depending on the area. Now imagine having another 2 BRs with their own baths on the upper levels. Could easily rent the master for $$800 and the other for $700. Now obviously this isn't the 2% rule, but if the tenants pay utilities, it wouldn't be a bad long term retirement play. I especially like the ashburn/brambleton areas because with the metro getting out there in 5ish years, the new town centers going up, and the thousands of data center jobs and large employers moving out that way, I think that area will be poised for an upswing in value within the next 10 years... and I know, I know we should never make investments based on appreciation lol!

Definitely reach out if you'd like to kick around some ideas and share some experiences.  I am in Herndon myself.   

@Jamal Atwell As far as the search for a mentor, I've had to alter my definition.  Unfortunately there's no store where we can go buy a mentor.  But to me at this point it is a way of thinking, and I think anyone who teaches me anything is my mentor.  I have several mentors I can call at any moment, and get questions answered or just shoot the breeze.  I met most of them through local meetups, and have broken bread with all of them.  The next path that I am on is to locate mentors while I prospect for deals, killing two birds with one stone.  If I am calling on owners of MF property to learn the business, are some of them going to be cantankerous and turn me away?  Of course.  But will some have long conversations about the business with me and agree to answer the phone if I call with questions? Yup.  I'm having to think outside the box with the Mentor deal.  Most important thing I think at this point is take the time once I meet people to go out and break bread without any expectation of immediate returns - just discuss ideas, possibilities, life, how we can help each other.  It builds the relationship beyond just doing a financial deal, and will yield more opportunities than just screening everyone for what I want right now. 

Does anyone know how to turn off public visibility of my Forum discussions?  For example I Googled myself and my BP profile came up with all of my Forum conversations there.  I'd prefer for those not to be publicly available, but only for the BP user community.

@John Miller 

Hi John, 

This may be a silly question, but why does it matter if the quads are old?  I'm guessing the underlying issue you are addressing is consumer choices?  I.e., if I can rent this old unit in a quad for $550, but right down the street there is a brand new apartment complex with all the amenities for $625, then why would I choose the older one?

Do you have any insight into the vacancy trends of these older 2-4 plexes versus the newer, larger communities?  I am curious because I have family in AZ and am considering investing there because there seem to be so many more options on the market than where I live in the DC area, where average incomes/prices are much higher. An extra $50-$150 may be insignificant here in DC when considering apartment options, but I could imagine that the same marginal investment for an AZ consumer may be a much weightier decision - so are the newer apartment communities eating away at the market for the lower end and older 2-4 plex units?

Interested to hear your thoughts.

On a side note, I am a Realtor in DC/VA/MD, and am very seriously considering taking my CCIM education and making the long term investment to get into commercial, preferably multifamily. I've met a CCIM in person at an investor meetup here in DC, and have read a few comments by other CCIMs in blogs/forums - you guys seem to be at another level in terms of real estate professionalism and know-how, which I aim to be at one day myself.

Thanks!

Brandt 

@Justin Pierce Justin, I am interested in purchasing in the area and would appreciate these contacts.  Thanks, Brandt

@Jeff M. Jeff, I am interested in purchasing a Class B or C MF unit in the DC area with a group of investors.  Please drop me a line to discuss futher.  Thanks, Brandt

Hi Wholesalers, I am looking for deals that would provide instant equity for buyers.  Deals that may not have the margin for a rehabber, but could still provide a home owner with a little elbow grease and the right attitude a nice little chunk of equity to start.  I have lots of young investor buyers who are eager to do this, however, they are not contractors, so no gut-jobs or shells please.  Carpet, paint, kit/bath upgrades - that will be fine for them.  Have a blessed day!

Hi Gang,  As the title suggests, I am looking for Multi-Family property in the greater DC area.  Anything from a duplex, to a large apartment building, to a condo conversion, I would like to hear about.  I have investors hungry for projects. 

I think you'll have more issues making sure the home is lead paint free so you can get your certificate to rent than the mold (don't think that is as aggressively policed yet).  Is this in Baltimore city or county?

@June Yang It's possible to get 1.2ish on tris/quads in some areas around the DC area. Though some interesting opps exist with properties in need of repair that after the project could generate in the 1.5-1.75ish range and possible provide some new equity. Out of the box 2% + in this area I think you're looking farther out into VA, such as Winchester, and other little obscure towns out there, and I am considering one of those as well. From my research, the bigger money is in purchasing a MF asset that can be improved. For example I was looking at a quad (4 2BRs) recently that had a huge basement being used as a coin laundry, and a huge backyard. The coin laundry is producing about $2500 p/y, whereas a 2 or 3 BR apt will produce $15000-$22000 per year after a 25-40k or so job to build out the apartment in the basement. Also, all of the other neighbors on the block have a 4-5 car indoor garage (separate units like a storage unit) that is tucked away on the back of the yard in front of the alley. These units rent from 100-150 a piece per month. So if I invested 15-20k in the garage, that would add another 6000 per year in cash flow from the garage.

So if I get my asking price down to 525 (the seller is way higher but steadily dropping and I am first in line unless someone makes him a ridiculous offer way over market before he comes to his senses), the project looks something like this:

Purchase - 525k

Gross Monthly Income (pre rehab) - $6,000 (4 2BR units at 1450 ea. & 200 for coin laundry)

 2% rule (pre-rehab) - 1.15%

Purchase + 60k rehab - 585k

Gross Monthly Income (post rehab) - $8,500 (4 2BR units at 1450 ea., 1 3BR unit at 2000, 500 for 4 indoor garage/storage spaces)

2% rule (post-rehab) - 1.45%

This is just an example, and I have seen residential MF properties that provide much bigger returns and instant equity thta require full rehabs, but this is just an idea. My biggest fear with residential MF is that even if I add a 5th unit, I may not be able to get it sold as a commercial property, so the extra cash flow is really only good to me while I own it.  This is the issue that I'm running into buying residential MF, is that a lot of times the owner wants to sell it for what they think it's worth or on the income approach used in commercial - can't buy them that way because if you over pay the comps by 100k because it has great cash flow, then you want to sell it down the road, there may not be enough comps other than the purchase you made to support the price higher then the market... then your stuck holding a very large bag.

For all these reasons is why I am more and more looking at commercial MF as a more viable option for the investor who wants to play the big game. For example there is a 17 unit apartment in a more remote location of VA that I was looking at, that is 800k, less than 20 years old, has management in place, etc., etc., and the monthly gross income is in the 12-13k range. There's your 1.5% right there, and it's a legitimate asset which if it can be improved upon (which I think it can be by adding a 15-20 car garage, and improving the units over 2-3 years so that they match the finishings of the premier apts in the area), then you can actually realize the additional value created. In this case if I take this property to 15k gross from 12k gross. That 3k gross could represent another 200k in value after I stabilize the property in 2-3 years (math below).

Additional MF Value:

Added Monthly Gross over 3 years - 3000

Monthly NOI (following 50% rule) - 1500

Annual Added NOI - 18000

Added Value (at a 9 cap) - 200000 (18000/.09)

Obviously this is a basic estimation (I like to just reduce any profit expectations by 25% to be conservative), but it's fairly easy to tell once you start doing due diligence on larger MF properties the ones that have potential and the ones that don't from a value add perspective.  

I am actively in the hunt for income producing MF in the larger DC area - if any of this sounds interesting feel free to drop me a line.  

@Rob Wilson Hey Rob this is truly a great story. Your post was perfectly timed because I ma about to start marketing in the same manner in my local market (DC/No.VA/So.MD). I am wondering, did list source provide phone numbers, and did you ever try calling the owners, or is mail the way to go? Did you send the letters in a standard envelope, or one of the invitation sized ones like Michael Quarles suggests? And since I am a bit of a newb, did you use a questionnaire or a list of prioritzed questions (which may just be 2nd nature to you at this point) that you could share when talking to the sellers to determine if you had a great deal? Thanks again for posting this is very exciting!