All Forum Posts by: Vincent McClendon

Investment Info:

Small multi-family (2-4 units) buy & hold investment in Louisville.

Purchase price: $372,000

2 4plexes in PRP neighborhood of LOUISVILLE, KY

Looking forward to it!

@Raphael Collazo Thanks for your feedback too. I spoke with L&N (my personal mtge is with them) but haven't reached out to other banks yet. I had a great convo with Republic witch put me down this path...well see where it ends up. Either way I won't be discouraged but may try to use BRRR with SFH to build up a capital base and then move into the multi family side. I just see the value of scale on the multifamily side so its tough to remain patient as capital accumulates.

This is only my second deal so i don't want to pursue a syndication until i have more of a track record. I really like your idea on hard money lenders. Once I actually have a deal on the table I will for sure look into that funding source, atleast for S/T capital. 

Unfortunately my schedule is locked today so i cant attend the KREIA event, but i will be at your event next week. I really appreciate your feedback and look forward to connecting in person. 

- Vince 

@Sheref Tawfik Thanks for that feedback and for sharing your experience. I'm trying to leverage my LLC and my partner. We are both providing our financials and the LLC has 1 property in it (in my bio). My guess is I'll get a similar outcome as you did, but thats fine by me (for now).

Ill provide updates here once I get feedback from Republic

Hey BP, 

I am in the early planning stages of getting involved in Multi-Family deals in Louisville KY. Was wondering if anyone has experience getting seller financing to partially finance deals in this space. Hoping to use a combo of commercial loan and seller financing to borrow up to 90-95% LTV. No deals in the works at present but working on getting pre-approved by a local commercial lender (Republic Bank). Are folks seeing deals structured this way in this market? Looking to get involved in class C properties via value add strategy and properties in the in $500-$750k price level (assuming the cash yield / cap rates makes sense).

Thanks,

Vince
 

I think the sellers agent can provide you more detail. A lot of times they share pro forma financials in the listing, which may paint a rosier picture than the historical actuals. If they cant provide 1-2 years of history, id atleast get copies of the leases and history of the utility bills. Given that the previous owner managed the property, they should have this data for you. If not, I would def reduce my offer price if I were you and get boots on the ground to make sure its a worthwhile investment.

@Derek Cespedes the IRR is really only relevant if you expect to sell the property over some horizon, but as the previous person mentioned you'd need the time horizon and exit price...there are IRR calculators on google but I can email you and example too if that's helpful...the formula provided is correct but my guess is an example would illustrate how it works.

Also, back to your original question I would look at similar properties in your area and use those to compare. While 9-11% isn’t super high, you also need to consider the associated risk of the investment.

Happy to connect to share and learn

-Vince

I'm new to RE but have a finance degree and background so figured id chime in. At a high level this deal seems a bit rich. Do you have 1-2 year of actual financials to see if the expense levels the seller quoted are realistic? Based on my calcs, OPEX seems pretty low here. I generally assume OPEX will be closer to 50% of gross rent. Also what class level is this? my guess is its C level (or lower). Furthermore what condition is the building in? (i.e is there any deferred maintenance. I would build in some cushion for that to be safe) Running these numbers and then assuming a mtge of 4% amortized over 25 year @ 75 LTV...my CF yield is like 14%. That doesnt seem too crazy but it does feel a little rich, epecially with 20% vacancy.

All in, I'm getting to an implied cap rate of 8.3%. I would compare that level to other comparable properties in the vicinity of your prospective investment. Ultimately though, I would make sure the expenses are accurate. Happy to hear what other folks think.

- Vince 

@Raphael Collazo - Looking forward to the event and connected with other RE investors in the area! 

Thanks @Kelly Dillon. Happy to be here! Is anyone else attending the KREIA event this thursday?