Leveraging 87 units.

[Gus G.]

Hey everyone! I'm 26 years old and I'm looking for any advice on what direction to take my family's multifamily investments in the Seattle area. To give a little context, our family has been passively invested in real estate for 60 years. My grandfather started a construction company in New Jersey in the early 50's and by the end of his life had roughly 3,000 units under management. Five years ago, we decided to sell all of these New Jersey assets and 1031 a portion of the proceeds into Real Estate in the Seattle area. We ended up purchasing an $18.2million 54 unit building and a $12million 33 unit building + a condo ($31.5mm total.) All three assets are owned all cash.

None of my family has any real tangible experience in actively managing and owning Real Estate. Before we reinvested in Seattle, my uncle had managed the entire operation/management. Our side of the family, however, had no involvement. That being said, I am hoping to take over our family's operation of our Seattle buildings/condo (we currently have a 3rd party professionally managing). I've spent the past two years in the management field developing the relevant skill set required to competently manage both buildings (still have a long way to go). Now my question. In the meantime, while I'm gaining experience, we are looking to deploy/leverage the capital stored in both of the buildings to purchase additional units. We have little experience on the acquisition/debt side of the business. Where does everyone suggest we start? Who do we talk to first? We don't want to immediately expose our position to lots of risk - is putting 50% leverage on these properties worth our time? Our much should we leverage given our position? Any advice would be greatly appreciated!!

Thanks,

[Mark H. Porter]

Gus, you’re in a very unique position in that your family could be the one establishing the risk, not absorbing it from others.  Even if you just leverage the, say, $15M I’m equity, that will give you over double the purchasing power you’ve already done with your cash.

I’m being honest that I hope a large banker or developer contacts you from the Seattle area.  This is a little out of my bailiwick.