All Forum Posts by: Todd Dexheimer

1. Both - I use loopnet a lot to find out if there are attractive looking cap rates. I also am constantly reading about markets and make lists of potential markets. With a quick google search you can find out population and growth to decide if you really want to dig in.

2. First thing to do is pick a few markets - I would say 3-5 max and research them to be sure your assumptions are correct. Then call brokers and property managers. I don't think you need to call one before the other. They are both important and can provide you with valuable insights and leads. Be aware they are wanting business, so ask questions that validate your assumptions - do not tell them what you think about the market. Ask each person for a referral also - you need property managers, realtors and lenders right away.

3. When I look at markets they need to have a population of 200k+ and a metro of 750k+. I like to see population growth of 2% with a continued growth of that or better (Midwest, so it's slow and steady). I also am looking for markets that have had a stagnant population or decline and high unemployment rate and are now turning the corner. The last thing is I like areas that have good rent affordability.

The split may also depend on the deal and type of financing. If you are buying a building with a large value add component that will allow the equity to be given back to the investors you may be able to get a 50/50 split or even partner with them like a hard money lender. Also if it is recourse vs non-recourse loan. If you are the guarantor on a recourse loan and no one else - that will help you leverage your position.  It is all about what works for you and your investors!

@Joshua D. the reason to take 50% off of Gross rents is because it's realistic. If you are self managing you could go with 40%. The reality is the properties will have expenses that you are not considering. One day a tenant will move out and do damage that will cost you $5000 and a month of vacancy. One day your water heater, furnace, refrigerator, etc will stop working. One day you will need to paint or replace carpet or a roof. When those big expenses happen your cap rate will be -50% for the year, thus bringing your effective cap rate closer to 10-20%. I own and rent around 50 SF-4 unit's and the numbers bounce from year to year. Some years I look like a real estate king and others not so much. I'm not saying to stop investing in small stuff, but the multi's have more stable returns over the long haul.

Recourse on the Mortgage broker? No. Make phone calls to as many mortgage brokers and banks as possible on Monday and send the top 3-4 the information they are requesting. You ran into a lazy/sloppy mortgage broker - it happens and it won't be the last time someone doesn't think about you first.

@Brian Adams of the 3 programs you mentioned which one do you use? I have around 150 units and looking to grow, so I want something that works for 500+ units

What you are describing is a flip and will be taxed as ordinary income. If you buy it in an LLC and keep it for a year you could technically 1031 exchange it tax free or sell it and pay long term capital gains. The general rule is keep it and make income for 13 months, but the rule is on the intent of the investment. If you are buying to sell it, then you pay ordinary income. You may be able to get with the buy, rent, fix, sell, but if you are doing this a lot and get audited you may get stuck with a big tax bill. I would talk with your accountant and come up with a plan that works for your business strategy.

I think 16 units is fine with all 1 bedroom depending on the area. It's especially attractive in areas with a lot of young people. If you're in a heavily concentrated family area, then I would shy away from it. Unit mixes are best, with a concentration on 2 bedroom units.

You can start an LLC for Flipping and just use the 1 company - you may want to be taxed as an S-Corp, but talk with your accountant. As a flipper you are selling the assets quickly, so you typically only have a few properties in the LLC at one time. You should be running the expenses and profits through the LLC. If you use personal funds "borrow" the money to your LLC.

I would suggest taking some of that profit and using it to buy income producing property.

I just posted a question about partnership and received some great opinions. Check that out. Know that if he has the money in, but has no say and is passive it may be a security. I create and LLC and split profits depending on the deal. Talk with an attorney that is experienced in syndications/partnerships. David Thompson gave a ton of good advice.

@Andrew Campbell my passion is finding, analyzing and running the deals. I do, however, very much enjoy meeting with my current investors and creating that relationship.