All Forum Posts by: Ryan Webster

@Shella Sanders

Cash flow quadrant

@Douglas Gratz

Stay out of the building/development until you are supremely confident in your numbers and your ability to exicute. There is much more risk than purchasing an existing property. You'll have alot of front end expenses and zero income as you navigate through the lease up process. Also it is very expensive to build do you'll need a market with high demand, high rents, great absorption rates. Also a top notch property managment team to get it lease up and profitable.

Financing for these is fairly easy to secure if you have experience, and a good business plan. I'd recommend finding an experienced partner if you are set on developing.

As far as the value add on existing units the formula is noi/ market cap rate =property value. Ask your broker or the property owner for the trailing 12 month financials and rent roll to determine current value and identify potential value add. Cbre does a bi annual cap rate survey in most major market you can also ask you broker for the market cap rate and comps. Just be sure that the comps provided are as similar as possible to your subject property. I'd recommend you read best ever apartment sydication, and ABC's of real estate investing. To better understand how to value multifamily.

@Chauncy Gray

I have seen a couple companies worh fee structure similar to what you are describing. I believe the vacant unit is a turn over fee. I havnt seen a renewal fee but I have paid a lease up fee for properties with high vacancy at the time of aquisition.

In my experience each pm has a diferent fee schedule you want to find one that represents and alignment of interest with the investment. For example base percentage grc plus maintenance and cap ex. Bonus 1-2% of grc for achieving or maintaining occupancy milestones. If rents are increase both you and pm will benefit as fee is percentage based.

I like to negoiciate the bonus and milestone structure as we acquire each property as every properties business plan is diferent.

@Christopher Neal

Not trying to point out the obvious but have you talked to your banker? To my knowledge all banks and credit unions offer 203k loans. Some bankers may not have experience doing them but they should know the person in thier branch that handles these types of loans.

@Samuel Ichite

With that amount of money I would not invest so far away. You can't manage your investment from dallas. And the deal will be too small to hire a good property manager. You can use opm for down payment this is common however you'll need a great business plan to acquire the down payment either from a bank, or a private capital investor. Have you done any under writing for the investment your considering?

Just a thought experiment. As the baby boomers progressively move to retirement communities and sell their SFH. And millennials continue to choose renting over owning. The immense supply of SFH should drive down prices. Removing the affordability barrier for the millenials interested in home ownership. However since there are not enough home buyers millenials or otherwise to replace the baby boomers wont this create a lack of demand and poor inventory absorption forcing home prices to stay lower. Could we be waiting for a rebound that never comes?

@Andrew Pettit

If it is a medium to large multifamily I cash out refinance every chance I get. The money you take in the refi will be tax free for you to invest in other properties or keep as income. Always leverage property that you are not paying for. Just dont over leverage, the bank is your partner and they generally wont let overleverage. But in the next down turn your property and everyone else's will lose value so you want to make sure you can still meet your loan to value taking into account this lost value.

@Salar Rouhi

Learn to underwrite, or find someone who will do it for you. If your banker has experience with multifamily they should be able to help, if not most good property management companies will under write for you. But I suggest you gain a fundamental sense of all the expenses associated with rentals even if you dont do your own under writing.

The basics are:

Expenses

Taxes

Insurance

Vacancy

Turn over

Managment

Utilities( if paid by landlord)

Operating Reserves

Hoa( where applicable)

Repairs and maintenance

Capital expenditures

Gross income- expenses= net operating income (noi)

Noi-debt= cash flow

Cash flow= happy Investor

@Chad Jarrah

You need to read some of robert kiyosaki's books to understand good debt vs bad debt. And really understand what money is because it's not what most of us think it is. Debt that your tenants pay is good, debt that you pay is bad. Right now interest rates are low and money is cheap you should secure as much long term cheap debt as the properties can support. Any money you take out as debt is not tax free even if you put it in your pocket. ( all though I recommend you invest most of it. ) the rich frequently pay them selves with "good debt" and why wouldn't you its tax free. However don't over leverage your properties, when the next economic contraction occurs they will all lose value and you could creep over your loan to value and be required to make a capital call.

@Hugh O'Neale

As you stated it would be in your best interest to select the new tenant.

I would retrade the price to reflect the new noi without the tenant. If they refuse have then bring you a tenant that meet your qualifications. Depending on you loi, or PSA you may lose the deal over this so it's important to consider the value of the tenant vs the value of the property. What vacncy % does this tenant reprisent?