All Forum Posts by: Ray Johnson

@Joe Splitrock I don't know the Long Island area too well but I do know Arlington, VA. (Crystal City neighborhood) already has an expensive market in terms of rental properties, the cheapest thing you can get there is a 1 bedroom condo in the high $300k's and HOA dues in the $300 a month range, Single family homes start in the $700k range in average neighborhoods. I think the surrounding areas will see better opportunities along the various Metro lines in neighborhoods like Alexandria, Huntington, Falls Church, etc. I'm no expert but @Russell Brazil knows the DMV area very well as it can get tricky for OOS investors not knowing the ebbs and flows of the various neighborhoods.

It should also be noted that the big builders are in various stages of developing 3,400 for rent units across the street from and surrounding the Pentagon City mall, these units sit between the mall, Crystal drive, and Jefferson Davis Hwy. These are all for rent high-rise towers, leases are expensive so getting a few miles outside of this area you may see some opportunity.    

@Karthik Ramachandran I agree 100% with @Stephanie P. In my opinion, while your two SFH's will give you zero credit with Multi-family lenders, The $800k in which they are worth in equity will allow for you to partner on a Syndication deal which will then allow for you to have a record in the commercial Multi-family investment arena.

After the Syndicated deal is completed, take your original $800k plus profit from the deal, your new found commercial multi-family experience, your education gained from learning everything on the syndicated deal and then you'll be able to decide if you're really ready for a true commercial multi-family property.

You'll also find out if you're looking at a $5MM property you'll need a minimum of $1,250,000 for the down payment, then you'll need all the cost that Stephanie mentioned, some other cost that wasn't mentioned are licensing and legal cost for the entity structuring, etc...

With this roadmap you're one deal away from being able to do what you're asking about:

1) Find an experienced Syndication Sponsor, create a 50/50 Partnership

2) Your Partnership has the resume to do the deal with the experienced Sponsor

3) Execute the deal once it's completed upon exit take your money and do the same thing for yourself

4) Goal met    

@Account Closed regarding the industry being in the use of these types of tools, additionally on BP where many investors will go through an entire asset investment cycle from research, acquisition, operations, and disposition without ever dropping anything in an IRR template would give new meaning to the often used term here on BP "Analysis Paralysis".

Personally for me the closest I get to using Big data is looking at the different ways companies are packaging the information on mortgage origination reports, I like to see how investors are buying on the debt side to make the numbers work. Even looking at the way something so simple as mortgage origination data is compiled and disseminated is problematic for the RE industry. I'm sure the G-Analytics farm has this information but at what cost and user implementation level does it become a viable product.   

Jessie, the question I have for you is, How has big data and new technology impacted the way you invest? How do you plan on using it in the future?    

@Richard McLain Congrats on your business! What's your plan for the future with your portfolio? Ever think about converting those 140 properties into One 140 +/-  unit Multi-family property?

I often wonder why some people holding over 100 units spread out decide to stay on that course instead of transitioning into a single medium size asset.   

@Tyler L. My plan is to look buy at a discount the properties that were acquired in the last 2-3 years that will be resetting on those 5 and 7 year terms, but were bought with minimum cash flow in hopes of appreciation, property upgrades that didn't occur or raised rents that didn't occur leaving the owners with a negative cash flowing properties after the debt resets. There will also be those with large expenditures occurring as well. These are things that currently take place in the market however I'm expecting them to happen in larger volume when rates continue to increase.

I've been monitoring the mortgage origination reports and over the last 15 months investors have increased purchases using 3, 5, and 7 year terms in order to be able to acquire the properties. This tells me that a lot of buyers are buying this way to make the cash flow numbers work, if the numbers won't work on fixed rate debt today many of them won't work on fixed rate debt in the future of a rising rate market leaving some owners forced to sell at a discount to get out or hold a losing property for as long as they can.

On the commercial acquisitions, I expect to see a smaller pool of opportunity however the same risk factors mentioned in the 4 and under unit property class will also exist in the commercial property class as well there's just more liquid competition from the small Syndication pools to absorb those deals, I'll only participate in Mid-size Syndications once rates reach a certain point as that is the best strategy for me.    

@Mason Warnimont It's very easy to get started however It's definitely not as easy as it seems when it comes to being successful. Just like flipping, and buy-and-hold investing the Lien business is also flooded with "Get rich quick" guru's promising easy fortune, this has caused this area of investing to also be flooded with a large population of uninformed buyers who are now your competition causing you to overbid or lose out to them on lien purchases. There are even online portals where people are flipping notes to unsuspecting newbies who don't know how to value a lien throughout the entire process, including cost of capital sitting on a note or trapped due to a homeowner bankruptcy case, etc...  

The lien business will require a great deal of education as well, you'll need to understand the neighborhoods of the properties you're acquiring the liens on, you'll need to learn different State and locals laws since they will determine your ability to collect, the various ways the owners can get out of having to pay the liens which will vary by state, and county, what your numbers really look like if the Title is clouded causing you to pay off others before being free and clear, etc...    

This is just my perspective on this line of business but others may have systems in place to help mitigate some of the traps of the business. I'll just say that every day we see over 100 post of successful property acquisitions on BP but rarely do we see a post regarding a successful lien payout, property get acquired, rehabbed, then flipped or added to a Buy-and-Hold portfolio. Hopefully those guys will chime in and share some strategy with you.

@Bosko Mijatovic I think the missing piece here is where are you looking to purchase the property? Are you Two looking to stay here in Orange County? If so, Do you have access to off market deals which is what its going to take here in OC.

@Bill Dengler a few questions, $2,000 on a 3-Plex as the project repair cost is for what? Unless you're getting this property far below it's appraised value, there is zero chance the bank appraiser is going to value the project $140,000 higher with $2,000 of work completed. What did you use to get your ARV? Did the comps have the same type of finishes your property has? Did you buy this off market and deeply below market and that's factored in to that mysterious $140,000 increase in value?

@Jacqueline T.D. Huynh That's awesome, looks like you did awesome on this project in every aspect. Congrats!

@Jacqueline T.D. Huynh Congratulations! I have a few questions for the group

1) How long did this this project take from beginning (acquisition of the initial two properties at $480k until the sale of the $2.1MM sale?

2) Since it was already zoned, were there any delays you ran into that would have affected your holding cost/capitalization hitting your bottom line?

3) Did you design these, hired an architect, or purchased an already designed package? I know purchasing off the shelf designs can be cheaper and time efficient, just wondering what your strategy was.

4) Did you partner with anyone on this deal or was this a solo deal?