All Forum Posts by: Ryan Daigle

Great question, @Lily Wang. I would say the primary tradeoff to consider when thinking about SFH vs. MFH is time vs. returns. You might be able to squeak out a slightly better return in a SFH than the per-unit return of MFH, but at what cost? You're going to spend a lot more time executing the purchase transactions and operating a SFH portfolio of 20 than a MFH 20-unit. Is getting 2% more return on your capital worth spending 500% more time (numbers are broad estimations)? What is the opportunity cost of that lost time? Maybe that's the right tradeoff for you - there is no wrong answer! But that's the primary tradeoff in my mind between the two asset classes.

As @Kristina Sparrow mentioned, it's not really a benefit to you in any way, it's a requirement of the deal. Many commercial loans will have penalties if they are paid off before a certain time period. So if a seller has a loan where they have to pay a 3% penalty if it's paid off this year, that would kill their profits or just kill the deal outright. So they make it a condition of the deal that the buyer has to assume the loan. Whether you get a new loan yourself or assume one is mostly immaterial to you, outside of the terms of the loan itself.

Assuming a loan is distinct from seller-financing, though, so be sure not to use the two interchangeably.

Hope that helps!

Hey @Andy Wilson, I think your best bet is to pursue the mortgage forbearance route with your bank. Since you don't have a payroll to report, I don't think you're going to be able to get into the PPP.

Hey @Todd Dexheimer. Great point. It's always good to remember there's a human behind every rent check.

We're doing the same, @Scott Beal. We've renewed tenants for a yearly lease at a small increase, but have offered a 6 month lease at their current rate as a fall back. We've gotten lucky and everybody has re-upped at the higher rate so far. But I would have no hesitation at keeping a good tenant at today's rate for the next year in this time of uncertainty.

Glad to hear you're having success keeping the property leased up.

@Ry Dill this is a tough question that is heavily based on personal preference. Some folks like the robust approach of a Quickbooks for their personal properties, whereas others get by on a spreadsheet. Both can work if they support the workflow you're most comfortable with.

Somewhere in between roll-your-own-spreadsheets and Quickbooks is something like Stessa. It's a lighter weight financial tracker specific to real estate. You may want to take a look at that if you're already exploring Wave (which I don't have any experience with).

Regarding cash vs. accrual, I've always used cash for its simplicity and get the sense that's the default for most individual owners. Simplicity is king!

Hey @Camille Roland - congratulations on getting this listing! To answer your questions:

* What would make this a GREAT DEAL?

Forced appreciation potential (which it sound like there is with half of units unrehabbed) and a strong path to organic rent growth as well. Any deal that pencils out to 15% IRR with conservative underwriting will catch the eye of most syndicators.

* What are some key questions that you would be asking me about the property?

Seller's reason for selling, property age, sub-market demographics, proximity to employment and retail, condition/deferred maintenance, vacancy history, access to T12 and rent roll...

* What would peak your interest and make you reach out for more information?

Strong market, strong returns - pretty basic :)

* What are your top three deciding factors that makes or breaks a deal (obviously the financials, but what else)?

I start with the big picture and work in. So rough order of preference would be 1) strong metro 2) stable sub-market 3) quality property.

* What do you find frustrating about working with a sales agent for this big of a project?

When they hold the property financials close to the vest or are not forthcoming about the realities of the deal. The agent should be a partner in the deal and should be helping all parties determine if it fits their investment criteria. Withholding info is not supportive of that goal.

* With COVID has your buying strategy shifted?

It has adjusted some of my underwriting factors to be more conservative over the next 1-2 years. Also, it has increased the close time with agency debt now looking at 6+ months to close (something your sellers should be well aware of).

Hope that helps!

I thought this was a decent article about lessons learned during 2008/09 regarding pricing of apartment rents. The gist being that pricing is only one tool in the toolbox with the end goal being revenue preservation and optimization. Candidate screening, lease terms, net leases, etc... all need to be looked at when managing revenues.

@Marqus Freeman I'm with you - section 8 can be a great hedge in tumultuous times like these. We have a few section 8 tenants in our properties and, outside of some additional administrative overhead, aren't finding them to be materially worse than other tenants. AND they come with the stability of a consistent rent check.

I will say, if you choose to go down the section 8 route, you really need to have a strong property management team in place. Just because they're section 8 tenants doesn't mean you shouldn't be screening them to find the good ones. Your PM team will be instrumental in making sure this happens.

Section 8 is also very regional. Just because I'm having a good experience here in NC doesn't mean there might not be downsides in your region. But definitely worth looking into!

@Wave Taylor while I'm not quite as bullish as @Erik W., I am still open for business and underwriting everything I can get my hands on. It's hard in this climate, though, when we just don't yet know what we're dealing with regarding the impact of COVID on multifamily and rental assumptions (to echo @Charles Carillo).

I laid out some of my COVID recession underwriting assumptions here.

I think we're in the phase where most people have moved to the sidelines, especially sellers. And we don't have enough sellers in trouble yet to force them into the market. So it's a bit of a quiet period. I think if there are distressed sellers, we'll start seeing them 1-6 months from now.