All Forum Posts by: Ryan Daigle

I've looked at this business model in the past (and may again in the future). When you're running a business like this with such a leveraged model and high fixed costs, you need to have a fair amount in reserves since you're so screwed if something goes wrong. What was the "standard" guidance these programs offered for reserve funds? If they advocated for anything less than 3-6 months in reserves then they were being negligent (whether practitioners followed the advice or not is a whole other issue).

Hi @Linda B. Usually banks and credit unions local to the property are your best bet for such loans, though I don't have experience with the non-resident aspect of your situation. Are you saying you've exhausted your local lenders?

Is it an option to only have your resident partner be the only loan guarantor?

Hi @Luke Carl. It's rare to see a landlord *want* to have all their leases end on the same day. I understand the simplicity benefit, but it also exposes you to risk having to re-lease all units at the same time of year. The conventional approach is to try and sprinkle your lease renewals throughout the year. However, that wasn't your question...

Regarding organizing lease end dates - with that many units I would hope you're using some sort of management software like Buildium? If not, even a simple spreadsheet could suffice. Or even a simple task management systems like Asana could help organize these dates?

Hope that helps!

@Josh Thomas yep, that's exactly what you would do (partner acts as the bank and provides a note, secured by the property itself, in first deed position).

However, a word of caution on this point:

> After building has been stabilized in 3-6 months

It's going to take a lot longer to take apartments at 10% occupancy up to 90%+ and fully stabilized. It will probably take at least a year to do necessary rehabs, get occupancy up and then you need to have it "season" for 6mo to a year for the banks to feel confident enough to provide you with financing so you can cash out. Just make sure you've been conservative with your timeline, would hate to see you lose the property because you didn't allow for more things to go wrong on the stabilization front.

Good luck!

Hey @Keith Doe. I know Willie Smith is active in Greenville, might be worth a conversation to get started?

Congratulations @Cole Brunet! Hope you don't forget us multifamily folk now that you're a broker :)

Hey @Jeff Davis. Just to challenge the assumption - why the avoidance of an LLC in the first place? That is the vehicle most commonly used to establish and enforce the operating rules of any sort of partnership. You may be able to get an attorney to draft a contract between you two as individuals, but I suspect they will also push you towards the LLC route.

Regarding lending rates – yes an LLC will receive a higher lending rate from a bank than a person.

You're welcome, @DeMonte Dinkins!

Already tenant occupied can be great... if they're good, paying, tenants. If they're problematic then that's worse than being unoccupied since they're probably going to do more damage and be more of a headache. So it depends (as always) :)

In this market if the property comes with solid long term tenants that have the ability to pay (even if slightly below market), that's probably a good thing. Just know what you're getting into. If they're bad tenants then you just have to know it's going to take more time and money to get the property stabilized.

@Account Closed got it. So.. what's changed in your approach since 4 weeks ago?

Hey @DeMonte Dinkins,

If you find a depressed deal, or distressed seller, in a market you like long term then it's always a great time to buy. Just make sure your numbers include very conservative estimates and the deal works even with low rents AND high economic vacancies.

Also, when thinking about 15% rent bumps – that kind of increase will almost always mean the existing tenants will leave. If you're ok with the resulting vacancy and turn costs, fine. But a less disruptive approach might be to gradually increase rents over 2+ years to try and maintain occupancy AND rents.

Good luck!