All Forum Posts by: Shane Pearlman

Hi Folks,

We have a buyer for one of our properties who just removed contingencies. The hunt is on and our 1031 deadline is October 25th. We are looking for multi family / mixed use (or could be a block of homes) between 1.3 - 2 million in Santa Cruz, Capitola, Aptos & Scotts Valley (please don't bother sending leads for the mountain towns, north county or south county). If you are a wholesaler or have an off-market lead, I'm all ears.

I am also looking in seattle in case you have a lead there: http://www.biggerpockets.com/forums/517/topics/142958-1031-deadline-need-multifamily-in-seattle-between-13---2m

Hi Folks,

We have a buyer for one of our properties who just removed contingencies. The hunt is on and our 1031 deadline is October 25th. We are looking for multi family / mixed use (or could be a block of homes) between 1.3 - 2 million in seattle core, queen ann, magnolia, ballard or west seattle. If you are a wholesaler or have an off-market lead, I'm all ears. I am working with an agent who is my property manager.

Welcome back Tyson. 

I'm not in seattle at the moment but have a property in magnolia and am actively hunting another apartment in the seattle core right now (downtown, queen ann, magnolia, ballard, west seattle...). Happy to answer any questions I can if you have something specific.

I hear you about the islands. My sister has been investing in Waikiki and while it is doable with enough creativity, it can add up fast. I've been staring at prices a couple time a year in Hanalei and have never been able to make the numbers work. Some day perhaps.

My wife signed off. I'll get the kids to bed and then drive over the hill. Figure I'll get there about 8ish.

Hi Dave,

I was in a very similar situation last year, and am in one again as of last week (tenant made an offer to buy their rental and has now removed contingencies). 

Last year we worked with a specific agent in our niche market and despite putting in all kinds of offers, were outbid by all cash buyers repeatedly. It got to the point where we had 2 weeks left and I was getting freaked out. We finally got something under contract, but I was pretty mixed about the deal. I ended up calling a few people for advice and my parents mentioned that they were quite happy with their latest rental acquisition and that seattle wasn't as hot as the bay area (at that point) but had the makings of a strong market. We had never done an out of state deal, but I knew the area where my parents lived and I trusted their opinion and experience. I was able to lean on their team and we got a property under contract that week with far better numbers, even with management. The experience since last october with the property manager has been so positive that my wife and I were asking ourselves if we should sell on of our places here and give our manager more doors.

I would consider your relationship network and see if you trust some to guide you in a second market. It's good to have a backup plan.

Doors or even buildings doesn't mean all that much without context. For me it was a question of the outcome. I was looking to create an asset base that would allow my wife and I a specific lifestyle. As a business owner who didn't have any formal retirement plan or some large corporation matching in a 401k, the strategy was up to us. We started with a simple plan. We needed 140k a year after taxes. I sat down with what I knew (3br houses in Santa Cruz, CA) and figured that if I could repeat my 1st success, it would take 12 of them with the right circumstances to achieve the goal. So I set out to acquire the right 12. By the time I bought my third, I learned enough to realize that there were significant obstacles to acquiring 12 (mortgage among others), but that getting the 12 wasn't the goal, the asset / cashflow base was. So we pivoted and began acquiring multi-res. It took 7 years to have 10 doors and it is quite likely we will be around 20 this year.

My point is, 1 property, 20 properties or 200 properties doesn't mean much. A more practical question might be, considering the following working capital + experience + relationships, how do I get the following outcome (money / time ...).

I'm game - that sounds awesome! Michael's on Main is nice and their back deck is perfect. How much forewarning do people need? How about thur 21st or friday 29th at 8pm?

@Helen Chau 

@Steffen Vulpius 

Great question @Nick B.. I often have 3 versions of the sheet I showed you. #1. actuals - what the current leases and expenses show #2. market - what I am confident I can achieve with the property #3. bank - what the bank will enter into the spreadsheet, even if I disagree based upon experience.

For that property, those are current rents with long term tenants. My property manager & I are confident that there is about 40-50k of annual rents on the table (should take about 2 years to bring it up to market). The 5cap / 2.2 COC is if I do nothing to the property.

Second, when you look at apartment in major metros on the coast (SF, Seattle...), the opportunity is less about cashflow and more about appreciation. The market caps here sit about 3.7 - 5.5%. There is extremely strong demand, good rents and minimal vacancy. Out of the 10 doors we have, in the last 7 years I have had 1 vacancy for 3/4 of a month. The advantage is one of economic stability and long term appreciation. So the bank may insist of 5% vacancy and I may put 3% into my spreadsheet, but this property for example has not had a month of vacancy in over 10 years.

As for the expenses, they are low because I separate regular maintenance from capital improvements. I simply hadn't finished entering those into the sheet. They affect both cashflow and reserves. Based upon the properties we own, 5k a year is about on target for the impact of day to day maintenance, but doesn't cover replacement of appliances, flooring, paint etc. Once I add those, it will be closer to what you listed. That said, I only intend to hold the building 7 years or so, and as such I may not be burdened with many of the potential capital expenses. 

We allow pets in one of our markets as it is a competitive differentiator. We have 3br units in a region with very little turnover and an anti-pet rental marketplace. By allowing pets we get our pick of the best tenants + increase returns and longevity. 

We charge $100/month extra + 1k increase in deposit. We have 6 doors which have pets in them right now (which we have held between 2-7 years) and so far have had no noticeable pet damage. I'm sure it is only a matter of time. Toddlers though are horrible on our homes! If I could legally allow pets and discriminate on young kids, I would seriously consider it (or at least surcharge them the way I do with pets). I hope it doesn't come off harsh, it is simply a fact of my experience.

@Nick B. 

Here is a screenshot of my property analysis sheet so that you can see how I split out my items. It isn't for the property below but you get the idea. http://cl.ly/image/1x242l3G0Z1o

Items which are part of cashflow are recurring (taxes, insurance...) as opposed to transaction costs which only happen at the time of sale.

It was 1,020,000 purchase with 30% down and 26,570 in fees, but we negotiated a 20k credit back from the seller which offset a lot of cash out of pocket. We did have some repairs to make (about 25k worth) that needed to be done up front. We do have property management but since the building was fully leased I didn't incur any up front costs. We do not hold the building in an LLC, instead depending on proper insurance coverage (commercial + umbrella).