Go all in as big as possible... Or not???

[Justin Hannah]

Hey everybody, so I have an issue and not sure what exactly to do. It is a good issue to have but still a big decision.

So right to it. I have saved up about 225k in cash and another 230k in stocks consisting of 401k and iras of with I could pull out a total of about 150k of. I also have 12 units in the form of three 4-plex buildings. I owe 198k on each one and they are currently valued at 325k.

So I have about 375k in Accessible cash and another 300k in cash if I sell my current buildings after commissions.

My goal is to scale up to as many units as possible over my Career and I have gone from 0 units in 2013 to 14 in 2017 (12 now after selling two single family).

Do I keep my 12 units that I currently have and use the 375k to buy a bigger sized complex? Or maybe sell buildings and have 675k to buy as big a complex as possible? Now I do understand that this is a lot of money for a blue collar dude like me and it has not come easy. I have bought and sold property and worked a TON of overtime to get this so it is pretty much all I have lol.

The struggles that I am having is a few things 1. I am having a hard time finding a good commercial agent/broker. Residential real estate is much easier to me because I have done much more and commercial RE is definitely a “who you know” game. I live in small town of 2000 people in northern CA so it’s a little tuff to network. Do I just contact several CCIM agents in all the areas I’m looking in? How do I get them to send me the “good deals”?

2. I have used 1031 before in residential and it obviously works fantastic when it works. If I try to 1031 the 12 units I currently have how do I find a decent complex in short time? I understand that’s part of it but can I write letter of intent with agent with the sale of properties being contingent? Can I reverse 1031?

3. How to get commercial agents to take seriously? I have been approved for 1.2m by lender in last two months for some small mIti package that didnt work out, but If I want to go as big as possIble and I dont have the whole 675k ready like now, seems like they don’t want to send me over a $2m deal if the cash isn’t ready.

I’m sure there is a ton of holes in my situation that you all will point out. So whats everyone think?? Thanks 👍

[Theo Hicks]

Hi Justin,

Commercial brokers, like residential agents, want to work with people who can close on deals, because that's how they get paid. You have a track record of closing on deals, so when having conversations with brokers, definitely bring that up.

Here are a few other tips for winning over a commercial broker:

• Pay them a consulting fee
• Take them out for coffee
• Visit their recent sales and tell them what you do and don't like about the properties as it relates to your ideal investment
• Provide them with information on how you will fund a deal
• Constant follow-up: whenever you perform a task that brings you closer to completing a deal

Once you know how much cash you will have ($225k or $675k), you can figure out the max purchase price you can handle by assuming you will need 30% to 35% of the total project costs in equity. If you can only purchase a $1 million building, find a commercial broker who focuses on smaller multifamily.