All Forum Posts by: Zach Jones

Man I need your confidence... I literally just logged into BP a few hours ago looking for this post and posts like it... HOW THE HELL are people investing into SF and MF properties right now?? The prices mixed with the rates are just killlling CF for me.. I'm running deals with 25% down and even considering some MF with FHA and its damn near impossible to make some of these deals make sense on paper. We're talking CF of less then $250 a month on a $100k investment.

And just curious, why/how are you so confident rates will come back down? I've personally been using the logic of if they come down, refi .. if they don't, you'll be glad you got in when you did.  What are your thoughts on the market crash?  possible? plausible? unlikely?  Just curious and I love hearing educated opinions.  Your rant was well received and I was happy to hear it because I feel like the RE world is on fire and I'm the only one concerned, haha. 

@Anthony Harris Lower margins is the thing I'm crying from the rooftops... I'm not sure how people are making these deals work lately.. good luck whichever route you choose.  Personally, I would only trade that rate if the property is going to have better CF or is generally a better appreciating asset.  Mainly based on your long/short term goals with the property..

So I'm a fan of MF investing.. I've been looking at traditional financing with 25% down (it sucks I know but I've saved and don't know of better options currently) and I've even considered going FHA at 3% IF I could find a nice quadplex locally. The main issue with both of these plans, ESPECIALLY the FHA one, is the mortgages! With non primary rates over 8%, nothing seems to be able to create any kind of decent CF. I'm running numbers on properties with 120-150k out of pocket with ROIs in the 11/12 year range because most properties are CF around a couple hundred a month. I know I could refi eventually but I disagree with ever accepting negative CF and don't want to put myself in any compromising position. That being said, I know the big players that are into both SFH and MF aren't not buying due to the rates.. atleast I assume they're not. What can I do? What are you doing? How are you able to invest in this climate and make deals make sense? Also, I live i the central Florida area where we've got duplexes selling for around 4-500k.. Let me know your thoughts! I'd greatly appreciate it. Having a very hard time keeping a positive mindset toward RE investing with the current economic state and "whats to come".

PS.. for those in my area who look at out of state investing, I'm attempting to learn more about this subject and getting over the sketchiness of never seeing a property or physically being able to handle something if necessary BUT, if you are.  Where are you looking at investing and in what class of property? Hows the CF?? 

@Bjorn Ahlblad I know for fact out of the 7 structures only 1 has a permitted newer roof, 1 is newer but no permit, 3 are "ok" *I took this as 6/7 years" but no ppw to back it, and the other 2 are just flat out old. Numbers have been everything for me.  Nothing else has had any real bearing. Everything you mentioned are my fears.. plumbing/electrical specifically.  And the property would be gained with 100% vacancy, so I don't think an estoppel certfication would do anything?

So I'm looking for opinions from some BP family who have experience in larger MF and older units.  I've been trying to do what I can to scale my MF holdings. As we all know, the past few years have been nuts for RE.  Specifically i the MF sector, there are houses near me that sold for 450k 2 years ago and are literally selling for a Million plus.  

I've found a few properties recently that I'm heavily considering but the main drawback is the age.. alot of 1920s and early '30s. For 1 million dollars at that. That being said, the numbers honestly make sense. ROI should be great. Appreciation should be steady based on the area and rent will definitely continue to trend up. But the potential "MAINTENANCE" horrifies me.

If you've got experience with hundred year old properties, how has ownership been? Is there anything specific to look for or be concerned with? I'm pretty scared to potentially run into major failures within the first years of ownership, what specifically? I'm truly unsure.  Wood structures? Pipes? Termites in said wood structures? 

Also, beyond comps (unfortunately not too many) what methods do you typically use to value large MF? I've attempted GRM and a few others but they tend to be out of the "standard" parameters. If it should be between 6 and 10, I might get a 14 or something similar. Using comps has been my preference when running these but alot of people are just out of their minds. I've got 1 prop for sale right now, 15 unit for 1.4M list when a 20 unit just sold 2 blocks away for 1.4M, and a 10 unit 1 mile away, updated but still a 1930 home, listed at 1.85M. Insane.

This post has been a little bit of a ramble, so to summarize.  My main question is would you spend a million dollars on a 100 year old property if it all made sense? Why would or wouldn't you?  and of course I would get an inspection, a very, very thorough inspection.  As always I appreciate any guidance anyone's got! Thanks

@Sam McCormack I'm not very familiar with the out of state investing but I'm sure OH is significantly cheaper then FL.. send them my way!

@Marcus Auerbach Love the monopoly comparison and I think you're right... and ya, everyone is explaining to my syndication.. I know about them and are familiar, the biggest ? with those is always where to find other syndicators But regardless, I like the upgrade idea because I can do it with sole control or maybe 1 partner at some point in the future but I wouldn't have to be a backseat driver to my investment. Knowing the current market, cooling down, but the current rates as well.. would you sell a CF triplex at a 3.8% pulling about 2600 monthly in order to upgrade to a larger project? Or prefer a HELOC or similar option in order to keep the good loan and only pay higher interest on the cash borrowed?

@Sam Yin Sam... That is the wildest response I've ever had on any post from this site.  First off, sorry for taking 2 damn months off BP.. Life has been distracting lately and I've really needed to focus myself back on the RE and the goal of Financial Independece thru RE (FIRE?). THANKYOU for being so open and willing to share your experience.  That story is phenomenal.. from pissing the wife off, bad choices, neglecting kids for a better future.. all of it.  Huge goals of mine as I have 2 young children and work in the auto industry where long hours are the norm.  The goal of going to commercial is a big 1 , especially with testimony like yours explaining the gains of CF when making the jump.  I would absolutely give up some equity in my triplex to move into a 6/8 unit and that seems much more attainable then dong something like going straight into a 30 unit or something of similar size.  As I stated before, it would def be hard to give up the rate but when trading for CF, if the deal makes sense.  who cares.  Can I ask where the deals came from and if they're local to you?  Living in central Florida, the cost of everything are pretty high and finding larger MF (5+) can be pretty tough.. I've seen people mention investing out of state ion better markets but the thought of that is  a little stressful.  Not knowing the area, markets, and not being able to go there if need be.  

I wanna say thank you again for taking the time because stories like that remind me that its possible.  It may take some time, stress, dedication, but the goal of true freedom are possible and I appreciate the motivation. 

Quote from @Sam Yin:

@Zach Jones

I spent a few years to acquire 3 SFRs before I jumped to a 2plex. Then 2 years later I got 2 triplexes at the same time. Then a year later, exchange 1 SFR for a 8plex. A few months later, exchanged another SFR for a 10 plex. A few months later, exchanged a SFR for another 10 plex, all in a 6 month span. Several months later, exchanged to a 19, then a 16, then 6, now looking for more.

BRAVO. Congrats, that's an amazing story and some of the amazing motivation i I see on this site.  Did you just straight up refi the properties and pull your equity or use the properties themselves as collateral on like a hard money loan?? I currently own my person SFR and then the triplex, both with alot of equity and then my personal savings.. the idea at selling/refi to pull out equity sounds great.  Until I remind myself that I pay 3.8 and 2.3, hence the reason I'm big on keeping & acquiring more.  Just curious, the 2 triplexes and 6 & 8 deals; where did they come from? Luck? Connections?  I'm always curious to large successes (which I would consider you) on how they made those monumental moves..
Appreciate the advice, especially from someone else without a mentor and kind of just winging it .

@Andrew Syrios I guess its a good thing I haven't looked into those SBA loans and I'll stick to my standard/unique financing options for SF and MF properties

@Sam Yin As you and many others have said, maybe I do need to stick to the stacking method and go up bit by bit, with a 4-10 unit as my next.. Just to gain the experience that is necessary for something larger.  You just see so many stories of people blowing up and finding these 15/20 unit properties and the allure of them is simply their CF ability to do what it would've taken 3/4 MF properties to amass. As previously stated, its just hard to give up so much capital for these little wins.  And trust me, I don't feel intelligent in the slightest. Confident forsure, but not intelligent, ESPECIALLY when I talk to people on here.  Appreciate the advice!

@Adah N. This also crossed my mind, but I was hoping the amount to be large enough to create some dramatic change. My first MF is a massive win by most standards. I'm expecting full ROI in well under 5 years and if/when my inherited tenant decides to move on , I'm expecting atleast an extra 350 in monthly CF. But even with all that, it cost me so much liquid to make that happen that my mind has been stuck on "double that cash down/find a bigger project" anything to raise that CF dramatically

@Scott Mac Did you red the title of this post?! HA.  That my issue friend. I'm a 29yo self made RE investor. I worked my *** off for the cash I've got and it would take me quite a time to amass $1M liquid.  I'd currently call it unrealistic for myself unfortunately.

@Gino Barbaro Love to see it!  I'v e got a good friend that I've talked to about partnering before just to bring together funds to potentially find a bigger deal (he has his own RE investments currently, not involving myself so he is in the space). Can I ask how you found your partners?? I've asked several people and have yet to get an actual answer from someone.  Also refinancing for capital I have seen is pretty popular and I wouldn't be opposed to make things happen if the timing/rates were right. 

@Neil Cronkrite @Andrew Syrios Oh ya, partnerships/syndication would only make sense with a much larger project.  I do need to look into private lending and even SBA loans.  I've not taken any time to talk to any lenders yet to determine what I could realistically get accomplished through regular financing.  Thanks for the suggestion!

@jaron I could probably come up with $150k, a far cry from 750k(3M) or even $375k(1.5M).   Everyone is very pro partner but I fear the getting screwed royally by some guy that knew enough about Commercial RE to con me into losing everything. I know that my be illogical , but the trust factor dealing in these sums of money is a real thing dealing with strangers.

@jscott I can't tag you for some reason. Realistically, how do you meet these people? ex: A bigger pockets post?  Hi, I'm a late 20s RE minded investor. I make X at my dayjob and I'd like to retire.  I've got X saved.  Would you and your friends like to fund my ventures for 45%?

lol. I guess its the networking aspect of RE that I've come to read is very important..

@Jared Bandel Appreciate that!  

@Darnell Lockett I'm Finance at a car dealershop so I'd love to get insight into the banks POV.  So a deal could be judged based on its potential to make money and not its current reality with a negative CF, for instance?   The sponsor comment goes back to my original issue of where the hell are ya'al finding these people??

@Andrew Syrios You're absolutely right.  The problem is, another tri cost me 120+.  Liquid, gone.  I don't have the financial ability to keep repeating this process without this taking years and years.