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Updated over 8 years ago on . Most recent reply
First large acquisition Business Plan
Hello all,
So, as a Business Consultant by trade, I never really thought I would find myself asking this question, but here I am. I am looking for advice on how to structure a Business Plan for a multifamily acquisition I am eyeballing. It is a rather large first deal to do in Multifamily (250 units, 5 retail spaces in addition), and it is a property that has tremendous capacity for forced appreciation, as well as multiple viable exit strategies.
I have written numerous business plans for different business types, but I have never done an in depth plan for real estate to secure funding on this scale. I am well aware that I will need to partner with a more experienced investor in this deal, but I want to make sure I have my ducks in a row before I go shopping it to people. I realize I am a newbie in the area of acquiring something this size, but I have every desire to appear professional none the less.
I know how to run the numbers, I know what to look for in the analysis, I am just unaware of any specific items I need to be sure to include in a business plan for something like this that, if left out, would lead to me potentially appearing amateurish (which I am), and missing funding.
Any advice that can be given with such vague information is appreciated. If one needs more detailed information, please private message me. I have an NDA and a Non Compete that I would like you to sign before going into more details. Thank you for all of the help you guys are going to provide.
Bigger Pockets always comes through.
Most Popular Reply
@Chris Tracy By Eyeballing, I mean that I am staring at it with an ardent passion and desire to acquire it. I know there is a capacity to force appreciation because of a few factors.
First it is at 70% occupancy and the market average for comparable properties surrounding this one is a rate of 96.8% occupancy. The reason for this is the fact that the property has gone through 10 on site managers between 3 management companies. Also, when I went to visit under the guise of actually wanting to rent an apartment, the leasing agent I met with was not very knowledgeable ( I am fairly certain she was new), and did little to nothing to attempt to close the deal and get me to apply. She directed me to the website to fill out at my leisure. I had a chance to speak with a few current tenants who stated they had the same experience. So, for one, appreciation can be forced through increasing the amount of tenants in place.
Appreciation can also be forced by upgrading some of the amenities that are below market standard for the area, such as the toilets, sinks, and lighting, allowing rent to be raised to market level.
Another way to force appreciation on the property is to execute the 3 letters of intent to occupy the retail spaces that have not been followed up on, and secure tenants for the other 2 that are vacant without interest.
Also, finishing the exteriors on the buildings properly would go a long way to increasing the rentability of the 2nd phase building. There are several balconies that still have exposed steel beams meant to be wrapped in hardy plank. It seems as if in several places money was misappropriated by the contractor after they received their draw and was not completed to specification.
The reason I know these things specifically is because upon visiting the site, I asked who the designer for the buildings were, and, having worked with that design firm while I was in the Multifamily Construction Industry as an Assistant Superintendent with State Building Group, I called a contact to see if I could peek at the plans and see what was called out in the sheets. There were several corners cut. But not irreparably so. If acquired for the correct price, all of them could be easily addressed.
The brokerage firm offering the sale has all of the relevant financial documentation one needs for due diligence, and I have been analyzing it accordingly. There is a lot there, so it is taking me some time to get through, but I am approaching it methodically. Based on what I have seen thus far, the biggest issue is lack of marketing correctly to the desired demographic, as well as the mismanagement of the previous property managers.
Given the people I have in mind to add to my team (property management company with a strong stance on selling, General contractor specializing in Multifamily rehabs, and a marketing team), I feel like I could make this attractive for investors to buy into.
And to address the exit strategy statement, that is in reference to the investors that would work with me. Depending on the financing structure and the terms on the loan (rate and balloon date), I believe a Cashout Refi would be an attractive option once the property was stable after a 3 year period. Which would return the principal as well as improve cash on cash return. Or, depending on where the market is at when it comes time, we could sell at a higher price point due to the appreciation we created by stabilizing the property.
I would personally like to stabilize it, cashout refi, return my investors principle, and then hold onto it for a few years.
So, that is where I am at in the whole process. Is there anything I did not effectively address? And if so, can you please instruct me on how to do so.
Ian
@Chris Tracy Thank you for your reply. I appreciate you taking the time out.
Initially, my first reaction is that at the current occupancy level and your lack of experience, you are going to need a very experienced operator and a very strong financial partner. Deals like this are hard to finance and raising both the equity and the debt are going to be challenging.
Secondly, mis-management by three different companies tells me that it is either an ownership issue, or something related to the building itself,(ie location, condition, etc.). 70% occupancy is not mis-management, especially in the Charlotte market, it a crime. The only question i have is if the property is owner by an institutional lender, in these cases, the lender may not be in a position to invest in the needed upgrades.
Lastly, if the current ownership is cash strapped, and the property is suffering from a bad reputation, the lease-up will be that much harder and you will need to allow for more marketing and leasing cost.
PM me as we may have an interest.
@Ian Ray- Do you have financials for this deal? I would love to help you underwrite it, analyze it and create the plan you are needing to move forward.
I typically don't invest too much time and energy into a deal until I look at the numbers first to see if the deal is worth the time for doing all the other tasks, such as doing further research, visiting the property, etc.
I would be more than happy to sign a NCND agreement.
@Account Closed, I tried to send you a PM and colleague request, but I am unsure if it went through or not. It is saying you already have a pending request from me. If you don't mind, could you send me your email so I can discuss further with you; or would you prefer that I call?
Originally posted by @Ian Ray:
Hello all,
So, as a Business Consultant by trade, I never really thought I would find myself asking this question, but here I am. I am looking for advice on how to structure a Business Plan for a multifamily acquisition I am eyeballing. It is a rather large first deal to do in Multifamily (250 units, 5 retail spaces in addition), and it is a property that has tremendous capacity for forced appreciation, as well as multiple viable exit strategies.
I have written numerous business plans for different business types, but I have never done an in depth plan for real estate to secure funding on this scale. I am well aware that I will need to partner with a more experienced investor in this deal, but I want to make sure I have my ducks in a row before I go shopping it to people. I realize I am a newbie in the area of acquiring something this size, but I have every desire to appear professional none the less.
I know how to run the numbers, I know what to look for in the analysis, I am just unaware of any specific items I need to be sure to include in a business plan for something like this that, if left out, would lead to me potentially appearing amateurish (which I am), and missing funding.
Any advice that can be given with such vague information is appreciated. If one needs more detailed information, please private message me. I have an NDA and a Non Compete that I would like you to sign before going into more details. Thank you for all of the help you guys are going to provide.
Bigger Pockets always comes through.
@Ian Ray
Very interested in finding out more details and I'm in town locally.
Lets connect and discuss
Alex