All Forum Posts by: Oren K.

@Deanna S. - It is a challenge when starting out in a new market. The smaller services providers have to charge more for a package or charge various fees on top of their basic fee (e.g. leasing, renewal) to make a living as they have to do a lot more driving around. As well, if they are a smaller provider, there is the risk of not having a backup (e.g. PM breaks a leg) personal.

To provide 'low' cost service, a PM needs density. Similar to landscaping, snow removal, trash pickup, small maintenance and many other 'job' service providers. Much easier to do 50 - 100 units in a building or small area then spread all over town. The less time staff / trucks are spend running around between work, the lower they can charge for the work itself. It all has to be paid for at the end of the day so they can survive (and hopefully grow!).

@Isca Harmatz - I believe you just went through the exercise of looking for a PM for smaller MF in Cleveland. Care to share?

@Brian Adams @Brian Burke

I was surprised not to see at least a Phase I on your lists of closing costs. 

My understanding was (is?) that when financing is involved, unless there is a recent (within 3 years?) report available, which it rarely is, lenders require a report as a CYA.

@Rob Gillespie - Yes - the CITY OF EAST CLEVELAND :)

Not sure if it was so much strategy as dumb luck. Buying something for a low enough price gives you a lot of room for mistakes and learning as you go. 

Looking to replicate success but most opportunities do not pencil out; property is too far gone, expenses under reported, etc. Most recent one I was looking at was in Cleveland Heights that was packaging 2 MF properties but the RE taxes in the combined proforma only had the RE taxes for 1 of them. Pointed this out to Seller and they went dark.... LOL.

Oren

Curtis,

To me, having several properties clustered for sale is more a signal of 'peak' pricing; Owners believing that they can get more now then later. The clustering does cause competition but as Adam points out, in a 'Hot' market, that may not mean much depending on what other reasons there may be for selling.

More importantly to me would be the opportunity this represents. As they are 'clustered' (and presumably occupied) but still depending on their individual overall condition and how well they are managed, they present an excellent opportunity to gain direct insight into the local market dynamics; vacancy, operating expenses, etc.

One strategy you could consider is the old 'worst' house on the street approach. Find the worst property (condition wise) and use that to negotiate a better deal. This gives you a value-add component to the purchase; renovate / upgrade it so you can get the best tenants at the best rents.

Just make sure of your numbers. You will be living there but this is an investment at the end of the day.

Good luck,

Oren

To add another bit of terminology - And when all the conditions are met / waived, the contract goes firm / unconditional. 

While there are exceptions, at that point the parties will likely close / transfer the property to the Buyer.

@Rob Gillespie - Take exception to your exception :), doing quite well in the Republic of EC thank you very much.

Totally agree that you about surprises and so you should plan for the worst and hope for the best. The more challenging the area, the better your boots on the ground need to be.

David,

Firstly - set aside the fact that this is your brother. Just like any other business relationship, get things on paper so everyone knows the rules to play by. No one wants to lose money or expect bad things to happen but Murphy has a way of showing up. If something blows up, you and he both need this protection.

Secondly - As you have read there are many examples of Money partners and Sweat / Knowledge Equity partners arrangements here on BP. What you outline not uncommon but stop using the words fair nor unfair. Assuming you are both free to accept or not accept the arrangement, whatever you agree on is 'fair'.

Be sure that he is explicitly aware that there is risk and no guarantee of success. Keep him as informed as he wants to be about status and be transparent about everything. He is vesting you with decision making so, in my opinion, even if you make a 'bad' decision there should be no blame unless you are negligent.

Oren

Hi Tom - I think you have a typo either on the listing on BP. The grandview home shows $147K on the listing and $174K on BP. I'm guessing $147 but one or the other needs to be corrected.

Gary,

As you also mentioned multi-family as an option, there are any number of BP members (and many more not on BP) that syndicate MF deals. Basically, as an accredited investor, you plunk down your money, sign a bunch of paperwork and let them deal with the property from identification and purchase to operations and disposition. You get regular reports, some cash flow (depends on the deal) and a typically a liquidity event after 3-5 years.

Picking the syndicate-or is where your challenge would be. There are several good threads on BP (learn how to use the search function) regarding characteristics, warning flags and practices when it comes to finding who is the right person / organization to work with. For what its worth, in my opinion, reading and analyzing is fine, but shaking hands and actually speaking to people is also needed. You are trusting people with your money and YOU have to be comfortable with that.

If you lean more towards learning and educating yourself, a direct partnership with someone may be a better way to go but remember that it will require a time commitment (this is not just book learning).

Good luck whichever way you go,

Oren

Investments of virtually every kind are a trade off between risk and reward. 

In a high appreciation / negative cash flow market you better have outside sources of capital to support the investment and you hope that the the market continues to appreciate; otherwise you have a money pit. IF your purchase timing was 'off' (i.e. at the top), you may not even get your initial purchase back if things move quickly (think 2008).

In a high cash flow / no appreciation market, your tenants and the building itself become the main 'risk' factors; turnover, damage, typically age of building / systems. If too much goes too wrong too fast and not only are you not making any profit but you need to supply additional funds which can wipe out 'profits' for years down the road. Alternatively, if you do not support the investment, it can quickly spirals down to no value.

Knowing what you are buying, having realistic expectations, underwriting it correctly and setting up reserve funds goes a long way towards success.

Most people are looking for something between these extremes.