All Forum Posts by: Rick Martin

@Nick Ruffini total return is dividing your total gains( $50k) by your investment ($50k) x 100 for the percentage, so your projected total return in this case is 100%.

@Lior Golan I might suggest you target COC%, and IRR or Total return. You want to get the most out your money and that may require leverage, so you are holding onto more of your capital to grow your investments. You can have $200/door with a 10% COC, but you can also have $200/door with 1% COC. Definitely get your hands on a good analyzer. Good luck with those BRRRR's.

@Bryon Fugitt remember "Don't wait to buy real estate. Buy real estate and wait." Try not to suffer from analysis paralysis. Are you game to go the active route? Are your goals more income driven, or are you seeking capital appreciation to grow your nest egg? If it is the former, you will want to start networking in cash flowing markets like Texas, the SE and the midwest (you may have some advantages there in your own back yard in MI). Colorado may present you with some appreciation plays, but remember these can be more speculative.

After doing a careful self analysis, you may decide you may want to go a more passive route, where you are collecting the cash flow and enjoying the tax benefits and appreciation, but not having to deal with the stresses and time consumption of being a land lord. IMO, investing in syndications are a great way to go if you have capital, because you can get all of what I just mentioned, and you can get in pre-value add (so you get the forced appreciation). Once you've researched a good team of professionals, they can run your investment as efficiently as possible, to get a great return on your investments. Finally, you can find a good combination of cash flow and appreciation by using a syndicator/operator who follows a value add investment strategy.

Either way, be wise, be judicious, but don't stand on the sideline. Get in the game whether active or passive.

@Scott Champion  If you have a good relationship with a property manager, that would be even better, so you can determine your stabilized value. A Co-star report that can help. It will have a median and average cap rate in there, rental comps as well as per item costs for expenses. @Evan Polaski makes a great suggestion though with the smaller MF, as it is not apples to apples, when you figure in ammonites, professional property management etc. A good PM is your best bet for getting the best numbers together.

@Deuris Liquey You're right so try to provide them comps first. If they insist on a cap, do rental comp analysis yourself within 1 mile (3 if it is more rural). Cross reference your findings with other services like rentometer. Take your annualized collected rents (plus, other income if there is any - pet, utility bill back etc) and subtract your annualized expenses. Try to collect utilities data, insurance, taxes, repairs & Maintenance, reserves and annualize these. For quick and dirty method, apply the 50% rule for expenses.

If this is a distressed asset, give them a cap rate before and after stabilization. Having said all that, show them before and after repair value comps.

It is always wise to be well capitalized. You want an operating budget going into a deal, and to continue to build reserves to cover repairs going forward, so you are not depending on cashflow for these items. In larger multifamily it is normally $250 or $300/door. In single-family or small MF, it is 10% of rents.

@David C. I hear these stories as well. Many pay for the expensive, multifamily mentor courses, but there are those lucky folks who team up with seasoned pros with 1000's of doors. 

You want to be able to offer as much value as possible to that person. Do a major self analysis, and find out what your super power is and make sure it compliments their skill set. Maybe you can bring them deals, maybe you can raise substantial amounts of money, you could be a wiz underwriter who can make offers on deals quickly. They might need to promote their business on social media, but hate social media.

Come from that place of how you can legitimately help them.

@David C. I think commercial brokers come across a lot of tire kickers. You want to make sure you can speak their language and have firm command of the terminology. Be confident in your tone, and don't be afraid to take some time and build some rapport. Get to know them a bit. I am not saying waste their time with small talk, but connect with them somehow. It is all about the relationship that you can build.

They will want to know that you can close, so make sure to have your ducks in a row, and don't be surprised when they try to qualify you. Not sure if it has already been mentioned, but having a seasoned multifamily investor on your team would help immensely, both for the operating and loan experience.

Be definitive in your criteria in terms of units, class, value-add, garden style/mid-rise etc. Have fun with it. I like talking to brokers.

@Oscar Sanchez My wife and I were faced with the same dilemma a few years back. In fact, I wrote an article on it. Ask yourself do you want the "America Dream," or financial freedom? We live in Southern California, so our mortgage was going to be in the neighborhood of 5 to 6K. We could either buy a house and have to pay 5k/month, or buy an apartment and get paid 5k/month (we actually ended up spreading it out over several syndications).

As @Wes Short pointed out, one is an asset, and one is a liability. Now there is a whole lot more at play. A lot of positives can come with owning your own home, but maybe expanding your multifamily portfolio will put you in a better position to get that home in a few more years.

@JP Donoso You normally have a lead sponsor and co-sponsors. The lead does everything that you covered above, whereas a co-sponsor will be brought on to raise capital and perform any of the other duties that Stony mentioned. You cannot JUST raise capital. Other common ways to contribute would also include due diligence, investor relations, marketing as well as what was mentioned above. I do not believe you are supposed to be compensated based on the percentage of capital you raise (ex. you raise $1M out of total raise of $10M, you receive 10% of the GP), but that is how most are done. Don't kill the messenger. Funds are another way people are doing it now to remain compliant. People will also work hard to get their broker's license, so that they can legally receive a commission.