All Forum Posts by: Avtandil G.

@Jason Malabute - investing in Indy is not any different from investing in any 'non-local' market, where non-local means you would not want to drive there every day ;) the name of the game is 'kiss 100 frogs to find 1 prince' - you look at 100 deals, you ballpark numbers on 50, you analyze 25 in-depth, you make an 12 offers, you land 1 deal. MLS certainly works. if you want to improve the accuracy and avoid the 'spray and pray' method above, you should try to invest into building local relationships - i'd suggest you first find a PM in Indy - you will be surprised to discover that local PMs catering to out-of-state investors operate differently from ones in CA. A lot of PMs in Indy don't want to touch 'this area and that area' but want to charge top $$$ for management, often north of 15% when all fees are added up. it was a shocker for me personally, who is used to the cutthroat competitive PM market in CA. The second biggest investment is going to be a broker - particularly if you're doing 'spray and pray' rout and will be making a lot of offers, you need to find someone who is willing to do that. probably someone who just started themselves in the business. Those two connections, if they are good, should be able to feed you a steady stream of deals. All PMs also have RE licenses and sometimes represent their clients on the sell-side - you may be able to pick up units or even whole portfolios that way

I'd not discount wholesalers, but as mentioned earlier, you need to know what you're doing there. Having a trusted relationship / connection will make things easier - you can have your PM or broker visit the wholesaling property to give you an trustworthy assessment. 

However, one thing you need to realize is that Indy was a super lucrative market maybe three years ago. It was overflowing with capital last year. Things may be slowing down this ear, but again, maybe not. Margins have certainly compressed - if you're looking to get decent returns, you need to be comfortable investing in C areas. And subsequently you should find a PM who will manage in C areas. 

Hi folks

I'm looking to learn more about Little Rock and investment opportunities in the area - would love to connect with local investors, RE agents and property managers to get a pulse on the market. 

I've been investing mostly in CA markets, but recently branched out to OH and FL. Actively looking at AR at this point as well. 

Your help is greatly appreciated! 

ok. if any of the readers from any major CA market, JAX or PIT are unhappy with their 18% average PM expense, I'm happy to refer them to my PMs who charge significantly less

@Kenny Dahill - thanks for chiming in. I'm not sure I agree with you analysis though - I think both absolute  as well as relative amounts matter in this business. absolute amount caps the expense and makes sense for more expensive rental markets, while percentage of gross makes sense in cheaper markets. I do agree that all management fees should be included, which is what I've been mentioning earlier as well. However, even with fees included (and I keep repeating that there are more fees I'm seeing in Mid-West than in CA), we still should never be anywhere close to 18% of gross. 

Think of it this way - 10% of $3,000, an average rent in San Jose, is $300. And 100% uncapped placement fee, means $3,000. Nobody in CA would agree to pay 17.5% of gross under those terms  ($6,300 / year). I know that since I have rentals in these markets and all my property managers cap their fees. For expensive markets like Bay Area, my relative PM costs are in 5%-7% range, in cheaper markets like Fresno / Bakersfield, they are in 8%-10% range. Total.

In that sense, @Peter Lohmann structure is much more aligned with investors' interests in a sense that he has flat monthly (and predictable) fee. Yes, RL is one of the more cost efficient ones in Columbus, but still 'expensive' by CA standards. 

@Tj Hines - I deal with whoever lists the property I'm interested - unfortunately, with smaller properties, i.e. up to 10 units, it's 50/50 - some commercial brokers but also some residential who once in a blue moon end up with MFRs for whatever reason. 

@Brian Juris - I don't believe I ever said that I'm finding 6-7% caps in LA ;) and I'm surprised there are even 5% caps in LA, last I looked it was more like 3%

@Peter Lohmann - i think we all agree that PM is a hard business to be in and your points about a good PM increasing the value of the property long-term are absolutely on point. However, I'd encourage you to take perspective of the investors as well - it's hard to rationalize that PM fees should add up to 15% while investors' return is only 6% - particularly since there are examples where we have more competitive structure in more expensive market like CA. I'm not sure how they achieve it, but it seems to be working for them long term

@Todd Dexheimer - i think it's well understood that sales brokers represent sellers and will paint rosy pictures. 

@Jeff Zimmerman - i don't know how much of this is the owners and how much is the brokers - when sellers provide rent / expense information, i'd presume broker would at least glance at it to make sure numbers add up before proposing a sales price and marketing unrealistic cap rates. 

just from today - listing claims 5.69 cap rate. got financials (1mo, rest proforma obviously) - $5,500/mo rent ($66k proforma), expense $1,451/mo ($17,412 proforma), insurance plus taxes - $9,623/yr. Asking price is 695K. or 5.69 cap if we take NOI based on the above numbers. Except, above numbers don't include management fee, don't include _any_ repairs / capex, don't include any vacancy, and use 0.7% tax rate instead of 1.1% actual. after adding missing numbers, end up with 2.6% cap - in other words, the property is overpriced by ~300K at the same 5.69 cap rate, that's 40%

Hey folks

I have a private banking with WF who also offers me portfolio lending on properties held in my name or my LLCs. They do not extend this to my C-Corp where I have a number of properties (yet at the same time, they do commercial with my C- Corp just fine). 

Anyhow, can anyone recommend / point me to any portfolio lenders that deal with C-Corps? Notably, for SFRs only, since I have MFR commercial loan access already - although, i'm open to consolidating MFR as well if I get access to both portfolio / commercial under single lender

-A

@Peter Lohmann- the companies I'm using in both have been in business for 30+ years and have each ~1,000-2,000 units under management each. I don't think that's an issue. As I said, there are no other fees...