All Forum Posts by: Steve Wilcox

Save as much money as possible so you have a nest egg to invest to get you started, Listen to biggerpockets podcasts for inspiration and ideas, go to local REIA meetings and network with people in your area who are doing business.

What sort of numbers are you talking about? Purchase price, capital required to close and first 3 months of operations, and how about income expense as well as potential cash flow before and after debt service?

If you are bringing a good enough deal there are ways to carve yourself a small piece of equity, cash flow, or at least a finders fess. 

Absolutly, shop around and call lots of different lenders, especially local banks. Be open and upfront about what you want to do, and see if there are any programs that fit, and if not ask someone else. 

It sounds like you have some cash, and are close to what this particular bank is asking for. Banks will want you to show some reserves for unexpected repairs, evictions, ect

I recommend you get all your stuff in order; pay stubs, 2 years taxs, hopefully solid credit score and some previously established credit, and create a brief outline on the property including income expense numbers, and see what different lenders offer. 

Keep in mind you will need to be able to show income and credit, and if not maybe a family member could partner and cosign to help you qualify. 

Dont give up after the first no

You should have already collected the full months rent at the START of the month, not after they lived there for the month. 

Cash for Keys, they dont get to stay there for a month then decide they may or may not want to stay. 

Collecting money upfront will protect you, remember this going forward

Ok next round of questions

With limited capital I have previously purchased with Hard Money which usually requires 20-30% down, 2-5 points, and 10-14% interest. After rehabbing we do a cash out refinance to pay off hard money and pull our cash out. We do this to keep our capital liquid so we can move on to the next deal, and to have some cash reserves on each property. 

Option #1

Buy super distressed with hard money, repair, rent out, refinance. 

However in this case since the total $$$ value of the project will be very high, hard money will be very expensive. Also I have heard that these properties can be difficult to finance and loans can take a long time to close, making hard money even more expensive and I will pay for many of the same origination costs twice in a short period of time. Also the time to rent out 20 units is much longer then the time to rent out 4, again raising my hard money holding costs. 

Option #2

Buy property that is currently operating but with some value add proposition

If I do this I would try to finance to purchase through a traditional commercial lender, with 25-30% down plus points, closing costs, ect will most likely take the majority of my capital. I would have limited cash to self finance the rehab of the property, not enough equity to pull any out for rehab, and so my money would be parked for some period of time (I would like to get my money back out so I can continue to grow my business)

@Joel Owens - Thanks for the info, it sounds like I am still a long way away from the world of triple net and larger commercial deals, and I will start to seek out some of the smaller mom and pop brokerages as well as calling those that have the types of properties I am looking for listed on loopnet, and the mls to try to find out who the players are in this space

Anyone in the NJ, PA, NY area that is a broker or knows of agents that specialize in the field of small apartment buildings please pm me

@Joe Fairless Thanks for the encouragement, I enjoy reading your blog, and appreciate all the info. I am currently looking in the markets I invest in which are the urban towns in NJ, Newark, Irvington, East Orange, and Elizabeth where I have a good local knowledge of the market. Now I am looking to set specific acquisition goals, then start looking at Income Expense forms and properties!

I am going to focus on 10-30 unit buildings that are distressed (still not sure what level of distress) and try to look for buildings I can employ the same strategy I am using now. 

I am currently a residential flipper, as well as buy and hold investor. My ultimate goal is to be a commercial investor, and I have worked the residential angle as a way to gain experience and build capital.

I use VERY active strategies for acquisition as I have completely bootstrapped my business from the start. I currently am buying multifamily properties with cash and hard money that are very distressed ( 25-50% of ARV), rehabbing, renting and refinancing. I am looking to apply a similar strategy to a larger building and start to 'move up the food chain'.

I am just dipping my toes into the water but I know commercial is much more complicated and a much slower process in terms of closings, ect. I am not sure if I am going to invest local, out of state, how to start finding deals, and generally I don't know what I don't know.

I am hoping some of the more experienced commercial players on BP can give me some guidance on some effective next steps to take.

I belive I am looking for a building no smaller then 10 units, sub $1mil(based on my own personal capital), with some level of distress or value add opportunity so that I can refi my capital out and keep moving.

@Joel Owens

As a multifamily investor looking to move to commercial, your knowledge level is so impressive and reminds me how much more complex commerical transactions are.

FYI Habitat is a volunteer program, you can go for one day and never go back if you hate it. I think you might learn something about construction, but not so much about its costs. Either way if you pay it forward you never know what you might garner from the experience.

There are no tips, this is not something you can just pick up. Experinced contractors and rehabers learn this from years of experince. If you are trying to wholesale consider paying for a contractor to deliver an estimate, or pay for a home inspection that way at least you know whats wrong and you can get specific bids to fix it.

Learning what needs to be fixed, what materials to fix it with, and how much it should cost is way more than a form post worth of info.

At the very least buy @J Scott book, and invest the time to understand the concepts he lays out. After that read Flip by Rick Villani, and you will be a long way further along, but nothing can really replace the knowledge you gain by doing it.

It is very difficult to estimate rehabs by the sq-ft. This method is ROUGH at best.

56k would be a light rehab for us, we are currently doing a project with a construction budget of over 150k. We are spending over 10k in interior doors and trim, paint sheetrock and insulation are going to be another 10k, so its easy to see how this stuff can add up. You need to price out what you are actually doing, then add 10-20% (more when starting out) as a reserve for any extras that may pop up along the way.

Construction labor costs are very regionally specific, and level of renovation is also determined by the neighborhood.

Also a gut rehab is a very tough starting point but you will learn a ton from teh process.

Based on your area of the country houses may be OLD which generally means plumbing, electric, HVAC, which means sheetrock and insulation. Construction costs more than most people think.