All Forum Posts by: Theo Hicks

Option #1: 25% down commercial loan

Option #2: JV (find a partner/partners who all fund the deal and have an active role in management)

Option #3: Syndication (raise money from passive investors, but 16 units isn't enough to justify the costs)

I would post this as a job to Upwork.com.

Would both units still have access to laundry? I would imagine you would make more money/find tenants easier by offering laundry access to both units rather than private laundry to only one unit.

High level

1. Get your hands on the historical financials (T-12, trailing 12-month profit and loss) and a current rent roll

2. Determine how the property is currently operating (income and expenses from the T-12 and rent roll)

3. Determine how the property will operate once you've taken over and implemented your improvements (new rents and new expenses - a local property management company or local owner you meet at a meetup group can help with this)

4. Determine how much it will cost to implement your improvements

5. With all of the information above, you should be able to create a pro forma (i.e., yearly income and expense projections) to to determine if the deal makes sense

Hi Scott,

I recommend locating the local meetup groups. Ideally, the ones that focus on MF. DC is a huge market, so I am sure you will be able to find a meetup that focuses exclusively on MF.

Hi Nathan,

One thing to keep in mind is that the legal costs ($10,000+) associated with putting together a syndication probably don't make sense for such a small deal. You'll want to aim for larger deals so that the higher cash flow makes up for the higher upfront costs. Or you'll want to go the JO route.

Also, as you mentioned, since you don't have any real estate experience, you'll need to either do a few deals on your own first or find a partner who has the experience. If you go the partner route, you will need to determine what value you are bringing to the table to attract a partner. Do you have access to private capital? Do you know how to find, underwrite, and asset manage deals? Etc.

Hi Ryan,

1. I recommend attending Joe Fairless' monthly meetup. Here is the link to attend: www.BestEverCincy.com

Hi Sean,

Your concern about the ballooning loan is common. Generally, the risk is reduced if the hold period is equal to the loan term, at minimum. For example, if the projected hold period is 5 years, the loan term should be at least 5 years. That said, a lot of 3 year bridge loans have 2 one year extensions, which follows this rule. Ideally, you don't invest in a syndication where the GP will potentially be forced to sell or refinance. 

45% to 60%, depending on the deal. However, you should base your operating expense on the historical OpEx and a conversation with your experienced property management company. 

Pros and cons of development compared to MF:

• More upside
• More risk
• Higher barrier of entry
• More involvement with local officials