All Forum Posts by: Adam Sheren

@Andrew Ashby - "In the end we will not regret the things in which we have done nearly as much as the things we never did"... good for you. - Thank you for your service to this country, and be sure to take care of your extremely supportive family! Wishing you the best from Michigan!

@Matt Tager Hi Matt,

As you will continue to find, and as @Jaysen Medhurst, and @Mike Dymski stated above, your largest asset in investing will be your network. Create a solid relationship with a commercial lender and you will be able to close deals like the one above, with 20% down alone with no net worth requirements and no post closing cash requirements as well. This of course, assuming the property has a proven track record of performing at a debt service coverage ratio of at minimum 1.25x. 

Unless of course you're looking for non-recourse financing in which case you will almost always have those requirements. I tend to agree with Mike's suggestion to start smaller - there will always be enough deals to go around, but you may not want to start with a larger project as any negative situations that may arise would be compounded due to the size of the property and number of units.

All that being said, for your first deal, requesting $1MM+ with no prior history of management experience is going to be difficult. Not impossible, but difficult. 

The other scenario, and this would work with non-recourse financing as well, is to create a partnership (through your network ;) ) with a high net worth partner on the deal. This person would provide the net worth, and post closing cash requirements to help secure the financing needed.

Good luck

@Bob Lachance, @Abel Sng Thanks, gentlemen - A solid option that I had not truly considered.

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@Abel Sng - Currently, I have 4 properties - 13 units. Three SFH, and one 10 unit. My goal is to acquire a minimum of 4 mid to large (20 units or more) multi-family properties per year - today I'm simply using excel.

To date, all of my properties have been funded with a combination of my own cash and financing.

I do not have any experience with syndicating a deal as of today.

@Hau N. - Help me understand the numbers - you say Gross Rent's are $1,900/mo then you state your operating income is $1,620/mo - where's the $280 decrease stem from? 

Originally I thought perhaps you were calculating an estimated 10% vacancy but that would be $190 which would bring operating income to $1,710 -

Secondly, you state your NOI is $1,024 - Niether $1,620 (your stated operating income) less $665 (your stated expenses) NOR $1,920 (your stated gross rent) less $665 (your stated expenses) equate to an NOI of $1,024???? When I do the math you provided, you have a NOI of $627 if you're basing the expenses off the $1,620 figure, or $797 if you're basing the expenses off the $1,900 figure - The 10% you list for Vacancy, Cap ex, maintenance, and property management alone equate to over $625/mo. in expenses regardless of which figure you use.

Also, you state the debt service is $1,050 - that means you would actually be NEGATIVE $26/mo after debt service according to my calculations, and that would be using your NOI of $1,024 and frankly, I'm not sure where that comes from???

Where are you coming up with your $35?

@Connor Heim, @Scott Weaner, @Joe Scaparra, @Account Closed - am I missing something???

@Jeffrey Radcliffe, @Junior Salters - Thanks, guys.

Junior - I had been reading on the @Michael Blank analyzer - do you believe it's worth the $$$? Not that it's expensive, but what would be your review, pros & cons?

Good Afternoon BP 

What types of software are people using to manage their syndicated deals? Is Argus worth the $$$, and would it even be able to do what's needed to manage a syndicated deal? or is that something a CPA should be doing for me?

Curious to know how people manage their deals through funding and post funding - or is this something to be hired out? 

I'm searching for a program or programs that would help me put together 5-10 page brief investment summary's for potential investors and for working through feasibility for myself. Things to be included are development proforma, operation proforma, 15 year outlook with YOY financial performance, something that will calculate IRR each year, etc.

Are you using Power Point, Excel, a combination of both. I'd like to find something I can use to create a feasibility, deal structure, and summary.

Examples, advice requested. Thanks!

@Andrew Jackson

You should never rely on a security deposit to be used for anything - assuming you'll be able to use those funds is a waste of time. They are only their for security - not funds for premeditated repairs. Also, In a perfect world you'd return every cent of every security deposit to the lessee every time. This would mean you'd have perfect tenants who take better care of your property than you would.

I'm having a tough time following your numbers. 

First off: You mention that your estimate of insurance (originally $1,500) was .."calculated by what seems to be an average for what other people say they pay for 10 Plex apartments,"... 

I'm quite certain this figure is not solid, annually, or monthly - I myself own a 10 plex and pay roughly $4k annually - estimated rebuild cost $1.2MM  - yours could be less than that, but most likely more than $1,500.

As for the Bank:

They are probably requesting a 2 years financial proforma of the property and a business plan (not the same thing). Your business plan is going to spell out what you're mission is and how you're going to go about it - the proforma is going to provide a forward looking estimate of how the property will perform in the next two years under your management. Typically based of historical figures with adjustments made and explanations as to why you think you'll be able to increase rent & decrease expenses.

When speaking with the property manager ask the following to get started:

what other properties do they manage:

how does this property compare - physically and financially (rents, expense ratio, etc.)

What is the going cap rate in the area, what are they basing their asking price off of? (best to double check with a local Commercial Realtor)

Why the vacancy? (maybe touchy, could be that they're just not managing effectively)

Are the leases annual, or month to month - depending on the deferred maintenance levels of the property, a month to month lease may be a solid option - helps you rid of bad tenants a little bit easier/cheaper/faster and usually provides more reasons to evict, sometimes it can be for no reason at all so long as you provide a 30 day notice.

Also - take a look at the property and try your best to estimate rehab costs - whether it's $2K or $50K, you'll want to have an idea. There are financing options (such as bridge loans) that would allow short term (usually high interest but for 12 months with interest only payments due monthly) loans to complete any rehab, with you then refinancing into an end loan product based off the "as complete" value.

That's what I got for now. Good luck!!

@Andrew Jackson

If the property is listed with a Real Estate Brokerage, then my advice to you would be to find a reputable Commercial Realtor and work with that person. They will be able to (or should be able to) advise you on cap rates, lease rates, vacancy rates, etc.

He/She may also be able to help you find out whether or not the property actually sold for $135K and if so, when that was. If it was 25 years ago, it has no relevance today, however, if it was in the last 5-10 years you'd want to know how they added value to substantiate that new asking price.

Best part about hiring a good Agent, is that their services are typically paid for by the seller through a commission split with the listing Broker.

Have you been able to verify your figures? Were you provided a rent roll, or financials from the previous year or 2?

Did you check the county website for the property taxes? Did you calculate your tax expense based on what the new taxable value may be at a purchase price of $200K? Not saying the assessor will automatically increase the taxable value, but he/she could.

Did your quote for insurance come from an agent?

How familiar are you with the area? Have you been inside to check the units, the basement (if any), have you actually reached out to the PM to inquire about the property?

If it's not listed, then perhaps it may be best to start with LOI (letter of Intent) and submit that to the seller) you could structure the terms to give you time to perform the due diligence to the extent of your satisfaction. This would also allow you to hash out your potential future purchase price so that you could structure your financing around that figure.

Thanks, and good luck!

@Don Konipol

A lot of information, Don. Thank you.

Go Blue!