All Forum Posts by: Allen Tracy

I'm partnering with a few other investors, all of us currently have some out of state small multifamily properties, and we're starting our research on good markets for small commercial multifamily that we can buy together.  I'm looking for anything between $400k-$1.2mil to start out with and would possibly grow from there.  Since this will be our group's first purchase we'll probably stick to something smaller and a little safer, buy and hold for at least 5 years, but still have some value add.  Maybe C+ neighborhood at the lowest but more in the Bs would be better.  We'd like to add some value, maybe cosmetic rehabs, replace mechanicals or a roof, but nothing too major.  Door count isn't as big of a deal (could be 5, could be 20) as hitting our criteria which we're currently nailing down even further.  We'd lean more towards cashflow but if it's a B neighborhood we'd be happy with a balance of cashflow and equity through value add.

My properties are currently in Columbus, OH but that market is getting expensive and very competitive.  I was going to look into Memphis, TN for my own small multifamily, not sure if it's good for small commercial multifamily.  I've also heard good things about Kansas City for small multifamily but not sure about small commercial.  Another member of our team has properties in Oklahoma City and is interested looking into that area more.

I'm going to start looking into all the stats like population/job growth, etc. but wanted to post on here first to see what others have been seeing in that space.

Any thoughts on the above markets or ones that you would recommend for small commercial multifamily properties?

I did watch that episode.  That's awesome that he responded so quickly.  Thanks for the feedback.

Thanks everyone, no wonder so many are leaving California. 

I live in California and I have some properties in Columbus, OH. I was thinking about creating an LLC in Ohio for future purchases since their annual fees are low. My new CPA is telling me that I'd also have to register that LLC in CA and pay the $800 yearly fee because I live here. That's the first I had heard of that. Anyone living in CA have LLCs in other states? My bank account for my rental properties isn't in California and I don't take any payouts from it but my address is on the bank account. I'll speak to an attorney about it but wanted to ask here first. Here is a link my CPA provided about the rule.

https://www.ftb.ca.gov/forms/m...

Ah, that makes more sense, you get the entire home to yourself and don't have to share walls or driveways with anyone.  The ones I've been running are for multi-family.  I'd definitely pay more rent for a 2-3bd home compared to a 2-3bd in a multi-family.

It probably also depends a lot on the location/class.  All the C properties I've seen advertised (and the ones I own) are all renting closer to the 25th percentile.  Some of the investors in my Columbus mastermind group said theirs are all close to the 25th percentile also.  Donny even showed me comps in the C areas that all matched with the 25th percentile.  Maybe a brand new rehab or extra amenities like extra bd/ba/ac or garage in the higher class neighborhoods might be able to bring in the 75th percentile but I haven't seen those in the lower class ones.

I have a couple properties in Columbus, OH and am interested in Indianapolis also. Just as heads up when running the properties through rentometer that most of the properties at least in Columbus rent closer to the 25th percentile number. Not sure if that’s the case in Indianapolis also but thought I’d mention it since it might change your returns when running the numbers. 

Just finished a rehab and cash out refi in Southwest Hilltop which worked out great due to the sky rocketing home prices driving up the appraisal.  Unfortunately due to the sky rocketing home prices, all of the properties on the market are crazy expensive and going for way over asking with no inspection contingencies (absolutely terrible idea).  Off market properties are closer to on market property prices and aren't the deals they used to be.  Tons of new investors flooding the market willing to take lower returns just to get into the game so many properties are over priced.  It seems like the majority of the properties being sold on market are nearly turnkey not leaving any value add opportunities.  Most of the comments about the market being great come from realtors.  No knock to the realtors as they've been insanely helpful to me and I'll continue sending business their way, just a funny observation.  If you already own a property then I agree it's an amazing market for cash out refis and selling.

I used to only put offers on properties that had at least a minimum of 12% cash on cash return for C neighborhoods and 10% for B neighborhoods.  Now you're lucky if you can find 8% in the C neighborhoods.  Many investors I know are either waiting for the market to cool down or are looking in other markets at this point.  I continue to run the numbers on properties daily but I'm just not seeing anything that pencils out.

I'd be curious to hear other's opinions on the market there to see if they're seeing the same thing.

Like a few others have said, I would go with a HELOC instead of a cash out refi unless you'll be getting a significantly lower interest rate on your cash out refi. I have a HELOC on my primary and have purchased two duplexes with it. I am in the final stages of completing a brrrr on one of them at which point I'll be able to take that cash out refi on the rental and pay the HELOC back so I'm not being charged interest on the money while I'm looking for the next deal.

I've had two duplexes with ERA Real Solutions Property Management for the last year.  They've been pretty good.  I have to keep a close eye on them and correct things here and there and push to get some things done or corrected but I've heard that's very typical with any management company especially one that deals with a lot of C class properties.  I've heard of some people having bad experiences with them and many being ok with them like I've been.  I did a rehab on half of one of my duplexes with them which went really well.  Columbus can be an extremely tough place to find a good contractor so it was nice as an out of state investor to have them manage that rehab for me.

Other than managing the properties yourself which as an out of state investor I don't recommend, you'll most likely have to manage and be on top of which ever management company you end up going with.  Unless I find someone else I'll most likely keep having them manage my current and upcoming properties.