All Forum Posts by: Yosef Lee

 I would add that the asset management fee should not be thought of as cash flow either. As you scale your business you will have to keep the lights on, hire personnel, etc. This asset management fee allows you the latitude to hire the help you need to do a good job overseeing your investor's investments. 

This is not a cash flow business.

Happy to share mine I made from using Word and Excel. It was to present a 22 unit multifamily apartment. Package is clean, nothing fancy and is a little over 20 pages.

Not sure how to share here so PM me if you'd like it, thank you.

Agree with @Michael Dang, @Erik W. and @Stace Caseria,

"C" areas are not bad. This is your lower middle class area/ blue collar neighborhoods.

I have 1,000 apartment units and been doing this since 1999. Based on experience, I get:

1. Very good cashflow in Class C

2. If you do value-add, you can even get appreciation (the "forced" kind) with Class C

3. With Class C, some of the tenants you get have section 8 vouchers which is good because you get guaranteed rent (but managing section 8 tenants is a whole separate topic altogether)

4. Class C are more "recession-resistant" than Class A. I actually made MORE money during the Great Recession in 2008-2009 and I am grateful for my buildings in "C" areas because their occupancy remained strong during that time. Class A on the other hand suffered significant rent and occupancy drops

5. With "C" areas, you can get good, decent renters who tend to remain renters their entire lives (whereas "A"/"B" area renters become homeowners eventually). In 2005 (when everyone can get a mortgage), class A rents and occupancy were dismal because their tenant base were buying homes

"D" and "F" areas are way tougher than "C" and even though I made money in D and F, I don't recommend them for the newbie investor.

For perspective, here's how I would classify the areas:

A - upper middle class/ income way above median/ very low crime/ best schools
B - middle class/income slightly above median to median/ low crime/ good schools
C - lower middle class/median to slightly below median income/median crime/ok schools
D - lower income/high crime/one house every other block is boarded up
F - lower income/90% of violent crimes happen here/ every other house is boarded up

Thanks for the tag @Andre Jernigan. I mentioned a little in the FW REIA page too, but my RE goal for next year is to find 6-8 more properties that cashflows better. This year (2019) i met my goal of reaching 10 properties. However, the profitability and cashflow from it was way under what I have planed for or anticipated. This was due to me over relying on others inputs and not doing sufficient diligence on my own to research local rental rates, ARVs, and rehab costs. I assumed a local professionals would be more knowledgeable than I am about these things so I lacked my own diligence. Here are my RE goal for this year:

6-8 better cash flowing properties (All aimed to be BRRRR or at least close to it).

Try out other property managers (I have already started trying out 2 others, but i want to try 1 or 2 more, give them like a property or 2 to them).

Try to be less involved. The goal here is to be passive if possible, but i think i worry about too much small details (but then again, maybe this is needed especially in the beginning).

Continue to build out my team.  I have a team, i just need to find more team members so i can scale faster.  I want to reach 200 properties in 10 years, and i will not reach that with just my current team.

On non-RE side, my daughter is going to be 3 and we are going to put her in a daycare, but schools in NY are so expensive (looking at $1500-$1600 a MONTH or possibly even more). While my expenses will be skyrocketing, I also recently realized that because I've been focusing too much on the future I've been giving too much stress to my wife about not spending money even while she is out with our daughter and her friends. So I need to find a better balance between being able to enjoy what we have today, while trying to expand my portfolio. I think BRRRR is the key here.

Finally, ever since i had my daughter, i've had VERY minimal exercise. My workplace recently had a full renovation and has a really nice gym.  my goal is to at least workout 2-3 days a week (which will be very tough for me as i am not a morning person).

Hope we both have a productive year ahead of us, and best of luck to achieve all your goals :)

My goal is to buy a duplex in the metro area, (Gwinnett, Cobb, far parts of Dekalb, etc.) But I've noticed these are usually not for sale, or they're being sold at prices that won't make sense for a person looking to cash flow properly.


For those who have experience buy MF properties, would it be safe to say that once a property is listed on the MLS, it's probably too late for a good deal? But somebody's doing it...so are they snatching them up before they hit the public, so to speak?

Funny thing is..when I DO see something, I often wonder WHY. WHY would someone give up something that is generating income? Maybe I'm just overthinking it! :P

Hey @Chloey M.!

What @Erik Hatch said: Drive for dollars. Obviously keep an eye on the MLS and have a good broker to keep you updated, but with so much competition and so few MFs in the area, I highly recommend finding those pockets of MFs and running targeted direct mail/cold call campaigns on those properties. Now you may think "why would someone sell this to me?" But you really have no idea what their current situation could be. Personally, I like to find the neglected properties and mail to them since these are the most likely to have motivated sellers.

So find those properties, start mailing, and don't give up. They may not be ready when they get your first letter but they may be on the 3rd or 4th. Again, you never know.

This is a classic example of if as a syndicator you can keep things SIMPLE it can be golden.

Most passive investors want a complex subject dumbed down into easy to understand information. Personally I like vanilla set ups. The more complex it gets can confuse investors and also invite some syndicators that might not be completely above board in their dealings.

Example: The syndicator creates a process so complex that they try and tilt overall returns in their favor and take away from the passive investors over time through manipulation and complexity.

There are so called syndicators out there selling information and courses or not even being the syndicator but a figure head for the deal bringing in some capital. Some even will syndicate anything just to keep those upfront fees churning and coming in.

You really want the syndicator to have aligned interests with the passive investors where both win. If a syndicator is only taking a promote of 10 to 20% then they almost can make more churning smaller deals and taking their fee going in.

I take 50/50 split as a promoter on retail deals but those deals  tend to be smaller in size with shorter exit time under 3 years. I have to feel solid about the property because most of my return is aligned with the investors on the upside. If I was taking nominal promote on small deals I am becoming almost a glorified property manager looking over the management company if there is one. In that case I would rather keep transacting commercial deals as a broker.

It is important to know that a syndicator doesn't need the money right away and they aren't desperate to do a deal etc. Of course everyone has to start somewhere the passive investor just has to assess the risk much more closely with a new syndicator and what they are trying to syndicate. That syndicator might offer above market returns to try and entice passive investors into the deal. Usually when I see passive investors jump into deals like that it is with smaller amounts of money to curb risk versus their overall net worth and liquid cash positions ( They might invest 10k or 20k versus 100k or 300k and see what happens). That train doesn't last because as soon as that syndicator gets 1 to 2 deals under their belt and more established they IMMEDIATELY look for a cheaper source of capital because they do not want to work their butt off for paltry returns where the passive investor gets almost everything.

Think of for example someone doing their first flip. They go to hard money lenders and only the ones that charge the super highest points and rates will typically take them on unless they found a deal so amazing that it curbs risks substantially then they might deviate some from their standard practices. Once that flipper has some experience the flipper is then looking to the HML to change the rates charged to something better for the flipper on terms, looking for a new HML lender, or looking for private money at a cheaper cost.

I believe in the passive investor and the syndicator should both feel like they are winning. If they are both trying to negotiate terms that takes advantage of the other party then that's likely a relationship doomed in the long run. Basically you have to buy into the syndicators philosophy and how they set up deals. If you don't there are tons of other syndicators that might work for what you are searching for.

If you are wanting a bunch of free info for becoming a syndicator Value Hound Academy has tons of stuff.         

@Yosef Lee

Hi Yosef,

There is also the (unintended) possibility of creating a Federal Tax liability for yourself without the offsetting cash flow to cover it.

Doing this isn't as straightforward as it may seem on the face. You need good council (tax, SEC and asset protection) to advise you on how to set things up for yourself and for the ownership group (getting that part of your team in place might be a good first step).

Because if you make a mistake, there are a lot of dogs that can reach up and bite you (the federal tax liability situation being only one of them).

Good Luck!

Thank you Scott. Tax is another big thing I'm studying now and I am sure that I'll need a CPA who knows about multifamily Apt investing, not just any CPA.