words of discouragement for firs time investor Multifamily Dallas

[Sanjoy V.]

I was in the process of talking to different folks to build my team prior to seriously considering a off-market 6 million deal in Fortworth/Arlington Texas area. I called this tax attorney, who scared the heck out of me. He thought I was nuts to look at deals that large when I haven't done any deals before. He was this elderly man and he was surprised at how the market has gotten, that people like were trying to invest. He asked if I thought the deal was a steal; I said no, it isn't, told him not sure if I will find one in this market. He went on to say, I was being foolish with my money, trying to buy in this market, without experience. If he was a banker he would never give me a loan, for not having any experience and would trash my application. He said, to be a real estate investor, you need to be 'busted twice' or seen the cycle/s. I told him I have researched this for 2-3 years, talked to multiple people, read everything thats out there, and was not jumping at any deal thats out there. Told him there is a management company already there and I have compared the rents etc and looked at the area, its a blue collar apt, median income is 50k plus. Its still has lower rent, when you take All Bills Paid into consideration. Its a class C apt, in an ok neighborhood, no crime, checked Trulia; I checked the rents, there is room for growth with value add, thought to improve curb appeal; its location is central near employers and shopping. Going in cap of 6% even after taking into consideration new tax which is 40k more than previous year, otherwise probably higher cap; and year 1 cap probably 7.5, with COC close to that. I will go for a 10-year loan, amortd over 30-years, plan for multiple exit strategies, based on the market. Hoping to get Fred/Fann loan, only issue, is lack of experience, but I am able to meet all other criteria; lender thinks I may be able to get by that, with having Mgmt company in place. Of course, now you start thinking about market crash, paying too much etc. IN 2010, stuff was trading at 9 CAP in Fortworth, Arlington area. Per door price was also ridiculously low. Anyways, not sure why folks use per door pricing when sqft can vary widely, and value is based on income a property generates, not the "door value". So now I am stuck, in self doubt, I am trying to rethink this whole thing, am I being too bullish with my first purchase? just want to see if any other BP folks have done a big deal as their first investment, also taking this market and area into consideration? Thanks in advance!

[Stanley Bronstein]

@Sanjoy V. Forget the messenger (the elderly attorney) and listen to the message. It sounds like he was telling you that he's seen enough people lose their shirt over the years and he's recommending to you to NOT jump into the shark infested watery world or real estate investing without first showing that you're a pretty good swimmer.

Don't let his words discourage you. Let them educate you instead ...