All Forum Posts by: Dave Bingham

@Jesse O. 

Maybe we should all meet. It appears you guys know something I don't!

@Mark J. 

Hi Mark. I don't need free coffee but meeting sometime sounds great! I've reached out to several investors in the area and met up with them. It's nice to meet new folks and see how I can help them. My experience with the Hillsborough county foreclosure site has been about the same as it was for Pasco. They use R4C to dispose of the properties. I usually see the house is bid up to 90%+ of its market value or it goes for a ridiculously low amount.  I have never seen the bids stop in the middle.

Typically the reserve is set for the amount of money due and all other fees incurred. In Hillsborough and Pasco some of these reserves are so low this can't be the case. If it were one-off's here and there I'd think it was just someone who had paid off a large part of the house and was just losing it but it happens frequently. I just don't think there are that many who pay off that much and then just let it go.

I think the Trustees keep the numbers low to entice and do not start with the amount owed but try to get it up to that amount. That is their job after all as they act as a fiduciary principal to the borrower. If no one bids at a crazy low price I imagine the trustees feel there is no demand and obviously aren't going to bid against no one and it goes REO. Other times I see it start low and get to 90%+ of market value. Checking the court records and driving by these homes after they have sold nearly everyday afterwards you can see the U-Hauls and very quickly determine that it was purchased by an owner-occupant. They are thrilled to get a 120K house for 105K. From an rehab and sell investor point of view we just can't compete with these buyers.

If you bid on something low and keep bidding the trustee never leaves it low that I have seen, hence no winning bids in between market price and very low starting balance. They always have the winning bid until the bid equals or exceeds the debt associated with the property. There could be exceptions but I have never seen them, maybe you have and that fuels your excitement, understandably so.

Want to meet some time and share some information?

@Travis H. 

You can determine the rate of return of these other investors through various means.

* Try connecting with investors at your local REIA

* Go to the courthouse and look up the mortgage. Details about purchase price and remaining balance are usually there. From there you can extrapolate the down payment. Talk with property managers in the area and figure out what current expenses are for multi-family. ( I just made a post asking this very thing). Once you have that info you can tabulate ROI.

@Travis H. 

Hi Travis, when estimating value for units that are 4 or under using a Gross rent multiplier usually is done. It goes something like this:

(Gross rent multiplied by (X))=Paid off asset, where X represents the number of years required to pay off the property.

So the higher the GRM the longer you will need to pay it off. GRM's that are around 10-15 are fabulous if the underlying asset is in great condition.

Try going to your lender and ask them what approach to value they would use. After all they are the one's giving you the money. Finding out what makes their underwriter smile is the key to acquiring the property.

I'd also go to other lenders in your market and ask them the same. The last thing you want is for your lender to be the only one who uses X approach to value and everyone else uses Y and for there to be a huge disparity in value between the two approaches.

I must have been sleeping. Please replace NOI with EGI in the chart.

Hi Gang!

I used to work in an appraisal firm that handled market studies and appraisals for multi-family such as apartments, assisted living facilities, and nursing homes. I'm getting back into apartments as an investor now but have been out of the business for ten years and in looking at the various deals it seems my expense percentages have changed somewhat. I'm seeing expenses varying all over the place. This makes sense with different classes of assets and the year they were built. The problem I'm running into is that my data is dated and it's difficult finding a baseline to work with. When I was active, any apartments that were lower than Class B or lower and had an expense ratio of less than 45% was suspect but that all seems different now.

I know that much of this can be affected by the property management and how they handle maintenance and the degree to which they allow deferment to occur. I also know another large variable is the area of the country but if you could give me your best shot I'd appreciate it. Hopefully others can benefit from this as well.

Class A:

Maintenance expense as a percentage of NOI____.  Expenses Ratio_____.

Class B:

Maintenance expense as a percentage of NOI____. Expenses Ratio_____.

Class C:

Maintenance expense as a percentage of NOI____. Expenses Ratio_____.

Class D:

Maintenance expense as a percentage of NOI____. Expenses Ratio_____.

Thanks!

@Jeremy Carl 

Hey Jeremy! When you're young and thinking about how to compete and seeing how everyone has so much money and such a large network it sometimes is easy to become hopeless in a new endeavor. There are a few things to think about. First at some point everyone one of these people that are real estate demi-gods were completely ignorant and knew no one. The second is a quote from Steve Jobs as follows:

“Everything around you that you call life was made up by people that were no smarter than you and you can change it, you can influence it, you can build your own things that other people can use. Once you learn that, you'll never be the same again”

If you don't mind dealing with crazy people and crazy problems I'd say grab a fourplex and rent the other three out. You'll most likely cover your mortgage and keep extra. Check out BP's Ultimate beginners guide to RE investing.

Good luck friend!

@Paul Koretsky 

Paul, check out

http://www.appraisalinstitute.org/the-appraisal-of-real-estate-13th-edition/

@Mark 

If you need a good GC I know a guy that does great work and is reasonable in his prices. When you are ready to officially make the jump to multi-family let's do lunch or something sometime and talk shop!

@Tony Vijayan 

Hi Tony. I'm not sure you did anything wrong. It may be that, he like most people, shy away from new things they are unfamiliar with or maybe he was just wanting to be done with it like he said. I'd say you have a few options here.

* You might consider approaching him again and demonstrate that with seller financing it's true that he won't "be done" but it's much less hassle than having it on the market and keeping him here for another 151 days. Perhaps offer to make the balloon payment at the end of 2 years instead of 3. Most lenders look for seasoning period of 6 months to a year, plenty of time to get the property under control.

* Consider taking on a partner that could get the conventional financing.

* Take out a hard money loan and have the seller take out a small 2nd mortgage payable in 1 year as a balloon. That way you'll have your 20-30% for the down payment and the seller gets his money faster than option #1.

As an aside, his expense ratio seems pretty low to me. Anything under 35% and it makes me think they are not accounting for all expenses or there is a ton of deferred maintenance you'll inherit. Good luck with it!