All Forum Posts by: Tony Castronovo

Well, last night I lightened up my keychain (felt really weird to not have that weight in my pocket). Packaged up all the keys to my single family houses in preparation for tomorrow's closing. As some of you know, I have sold my entire SFR portfolio and tomorrow I will be "homeless" snif snif.

My journey started in late 2014 but didn't buy my first property until early 2015. I was able to amass 8 SFR rental properties...got distracted with a nightmare flip in late 2015 / early 2016 (I posted about this awhile back)....but rebounded after that setback establishing processes, systems, relationships, and confidence one property at a time. No home runs but I'm quite happy with consistently getting men on base with singles and doubles. While I preferred not to sell, it's the best way for me to focus my time and money on multi-family apartments. We are currently under contract and in the due diligence phase on a 16-unit. While I am sad to part with my single family homes and how I cut my teeth in real estate, tomorrow will be a key inflection point and beginning of a new set of challenges. I am sure I will be reaching out to many of you for continued wisdom. Thankful for the BP community!

Thank you @Michael Dang and @Joe Splitrock

We are selling our SFR rentals and the tenants have all been aware. We are communicating with them of course. Is there particular/formal documentation we need to provide regarding the transfer of security deposits, rents, agreements, etc?

Thanks @Bhanu P. 

Way to go @Alex Franks! Congrats on your 16 unit!!

It’s good you are considering these things but consider the bigger picture. If the neighborhood is geared more to owner occupants and you will plan to sell sooner than the neighbors then I might be more concerned. I once bought a house with a power line visible in the backyard and it turned away a lot of buyers. But the things you refer to are not permanent. If I planned to hold onto the property for many years I would worry much less. If the numbers work and you feel good about the house otherwise I say “go for it!” There will always be some sort of issue...crazy barking dog, screaming kids leaping off trampolines, ghosts (yep!...house next door was supposedly haunted). As long as there’s no uranium buried in the backyard and it makes good business sense I would overlook the neighbors’ temporary unsightliness.

Good stuff guys.  This is very helpful.  @Scott Skinger thanks for tagging along on my post and provoking the good dialogue. Haha.

First, I am learning that "typical" and "commercial" should not be said in the same sentence.  But a couple questions for those with experience in multi-family apartment complexes.

First, what should I expect to pay for an environmental survey?

What about financing?  I have a couple of lenders I am working with but want an unbiased opinion on what a good structure looks like.  I know everyone's situation is different.  For me, I am trying to minimize risk by saving some of my cash for operating capital.  My planned exit strategy is likely to be a refi in a few years to hopefully pull money out to fund the next one.  If it's too hard to say what is "typical" then please respond with what you think a good set of terms would look like.  Here is what I am thinking:

• Term:  5 years with 6 months of interest only (is 7-10 years common/achievable without getting hammered on rate)?
• Recourse loan (pretty common for your first deal?)
• Origination:  1% (is less than 1% common?)
• Amortization:  25 years 
• No pre-payment penalty
• 80% LTV

Anything else I should consider?

@Andy S. It is a 16-unit.  2 buildings built on 1.74 acres with an additional 3 acres cleared and ready to build on....if I wanted to consider that in the future.  It's good upside if the demand in the area would support it.  I see no reason we couldn't add another 16-24 units very comfortably.

@Jan H. The property is located in Brazoria, TX (about 80 miles from Houston). I'm happy to share numbers, but I'd like to close on it first. I'll say this for now...I'm selling off my SFR portfolio and (assuming all things go as planned) will be spending slightly less on the MF and increasing my NOI by more than 30%. Of course the real opportunity is to improve on that NOI that I will be inheriting from the current seller.

I'm doing a 1031 exchange (thanks for all the education @Dave Foster) which should also help me save on the capital gains taxes.  While I have my replacement property under contract, I have still be working on my backups and still touring/analyzing properties.

Things have been pretty hectic while simultaneously trying to pull off both the largest sale and largest purchase I have made to date. Ready for a little R&R over Spring Break to catch my breathe. :-)

Thanks everyone!

@Jay Helms I appreciate the article.  And I won't let emotion get in the way.  We negotiated hard for two weeks and then the seller became unreasonable.  We said "thanks but no thanks" and let him think on it for awhile.  He came back a week later much more reasonable.

Perhaps a bit premature for celebration...but after three weeks of negotiations I am pleased to say we have our first multi-family apartment complex under contract. We are transitioning from single family homes and hoping we can grow our business more quickly and profitably. It will be a new set of challenges and another chapter in our real estate journey. A bit nervous and hoping this is the right move...but can’t be content with prior success as without stepping out of our comfort zone there can be no growth. Wish us luck!