All Forum Posts by: Joe Willets

@Jace Perry For finding new deals, a great agent can be the best tool out there.  I often have properties pending, or about to come to market, that I can tell investors about ahead of the game.  They like being the first to get the possibility.  

Otherwise, you can always poke around on loopnet.com , your local MLS, crexi.com , and even investeagle.com (still relatively new website)

@Hector Estrada, Cap rates are important because it shows the reality of the NOI vs purchase price. It's not easy for me to give good numbers, as my market (AZ) is pretty different from yours. In AZ 5-6% is pretty normal. Keep in mind, on the listings, they numbers will be "proforma" (read: notional).

The other HUGE thing to take into consideration is Debt Service Cover Ratio (sometimes seen as DSR, DCR, or DSCR). You need to know the Net Operating Income (gross income-total operating costs) and divide that by the total debt service (principal+interest). NOI/Debt Service=DSCR. If you get a number below 1.2(+/-), you will probably have a hard time qualifying the property for the amount of money you need.

Basically, never ignore the potential debt service for a property.  It can change the amount required for down payment, or even kill a deal.

For #2 above, Dave mentions a reverse exchange.  Those are a great option for situations like this, but as Dave said, $27k might not be enough to make it worthwhile.  QIs often charge in the $5k range to take on the roles/responsibilities of Exchange Accommodation Titleholder.

Great comprehensive response Dave.  Personal property is no longer an allowable asset to exchange under the IRC §1.1031. Also notable, the relinquished property  must be "held for productive use."  So, a replacement property must be like-kind.  

 This is exactly the right mindset.  In multifamily investing, you need to consider the deal, the location of the investment, and the job market/economy in that location.  As others have mentioned, many areas were hit harder than others.  In Vegas, the recession caused less discretionary spending, leading to entertainment worker layoffs, and people couldn't afford rent.  Vacancy is a killer in the investment real estate world.   I'm a big fan of C-Class multifamily.  There will always be a market for it.  

As far as the next big recession, an inverted yield curve can be an indicator of troubling economics.  However, as the gentleman in the manufacturing industry pointed out, they are extremely busy in his industry.  Manufacturing is a leading indicator that the economy is strong.  

The US financial stability is much stronger than it was 10+ years ago.  Stronger bank balance sheets (with significantly less toxic investment assets), manageable household leverage, and personal savings rates are higher.  Even though The Fed has been slow to enact monetary policy changes, most economists see it coming.   If we are "on the verge of collapse!!", as I've heard people say, there certainly don't seem to be the right indicators.

As far as timing the purchase, I like the gold nugget analogy.  

I'm totally paraphrasing/butchering it but:

Hypothetically, this gold nugget is worth $500.

    An bank says, "hey I'll give you $20/mo to let me hold onto that."

    The recession hits, and the value of your nugget plummets. 

    As the value changes, it doesn't affect you at all.  You still get $20/mo.

The point being, as long as your asset is producing an income, the value of the asset can change, and you shouldn't be affected much.

This got a lot more long-winded than I initially thought it would...