All Forum Posts by: Andrew Anderson

Hello BP! I've just entered contract on an 18 unit apartment complex (rehab value-add, buy/hold) in WA and will be posting updates here (along with questions!). This is my first multifamily investment and I put together a small syndicate of friends/family. Here are some deal specs. 

1. $1.35mm off-market acquisition

2. $173k sched gross inc

3. Pro-forma of .48 op exp/gross inc (way above market expense assumptions) to give cap ~6.7%

4. Structure between 30-40 yrs old

5. 75% LTV: 1.56 DSCR

6. Their rent is way below market. I assumed increasing to market rent over a 5 year period (infl. adjusted)

7. Exit on Y5 (priced @7.5 cap) to give IRR at ~35%

Seems like a great deal if my pro-forma assumptions hold. Here's a couple questions:

1. A local lender (top 5 largest credit union in the US and locally based) I've been working with said that they consider .33-.39 exp/gross inc to be "conservative." This seems way too low from what I've read on BP and the building's age, but how much should I trust their teams/local knowledge? (not like it really matters if the deal still works at the more conservative estimate--hah)

2. A requirement from one bank is that the guarantor (myself) needs to have a net worth equal to the loan amount and liquid assets equal to the 9-months of P&L expenses. I easily cover the latter, but don't [yet] have >$1mil net worth. I really don't want to ask one of the other investors to give recourse. Is this a common requirement or should I keep shopping? 

3. Deal structure: I'm planning to give all investors a 10% IRR preferred hurdle (before I get paid as the manager for finding/structuring the deal). Anything above 10% would be split 80/20 in their favor. I'm not going to be charging any finder's fee/acquisition fee and I will be covering LLC formation/attorney costs. I will also (hopefully) be the only one giving recourse. It pencils out to 30.57% investor level IRR with a 3.27 5 year multiple. Does this seem like a fair deal (assuming I'm the only one giving recourse)?

Thanks and I'll post updates as the deal progresses!

Anyone? Do you guys need more info from me on this, is this too much of a local issue to address, or does the lack of response mean that I should just go to the rental property calculator? :)

I didn't think the calculator is as applicable in 20+ unit multifamily scenarios.

Hello BP Community,

I'm looking at a 28 unit off-MLS multi deal that I believe I could at least put a bid on, but (as usual) their reported operating expenses seem low (esp maintenance/repairs if they assume CapEx in that figure). I know a lot is locally/structurally dependent, but I would love any advice or suggestions on expense comps for a 28 unit. You can assume a class B+ property. My broker said he didn't think they were too far out of line. Here is annual data that I received.

Sched Gross Inc: $259.3k

Tax/Insurance: $26.5k (10.2%)

Utilities: $18.1k (6.7%)

Professional+On-site Mgmt: $23.9k (9.2%) (need to find their SoW)

Maintenance & Repairs: $14k (5.4%)

Landscaping: $2.1k (0.8%)

Admin: $1.4k (0.5%)

Total Exp: $86k (33.2%)

I'm thinking of adding an additional 12% of gross on for CapEx. Would this make the deal more realistic? Thanks!

@Clarice Tan 

Land ownership laws in Indonesia--and to a lesser extent MY--are set up to protect their citizens (foreigner ownership and freehold restrictions, minimum value, etc). If you held Indonesian or Malaysian citizenship, you would have a big leg up in those markets. If not, you'll be restricted by the amount of capital you have and the minimums each country has set up. Locals in both countries will be happy to take your money to partner, but be careful who you invest with. If there's ever a dispute, the courts will go against the foreigner (especially in Indonesia). Malaysia has a lot less regulatory/fraud risk IMO. These are all mostly my opinions--be sure to do your own research too. :)

Singapore also has systems set up to help their own citizens with home ownership: primarily through huge first home HDB grants/subsidies. If you really want to invest in Singapore while you're living with your parents, you could buy your first HDB then rent it out (be careful to adhere to landlord laws--they're tight and short term stays like Airbnb are illegal/enforced). I'm not sure about the loan qualifications, but I'm sure you'll need an income source (and probably some money in your CPF). That'd be easy to google.

My overall advice would be to look for a part time job in real estate (either at an agency, analyst intern, mortgage co, etc) while you're a student and if you really want to invest in RE at this point, do it through a REIT or some publically traded company like CapitaLand (an example, not my stock pick) until you have a bit more saved. You can't really find the <$100k SFHs in Singapore that you see people posting about in BP.

Hope this helps!

Hi Jason. Has it been their primary residence recently (at least 2 years in the past 5)? How much do you want the property in your name immediately? The cost basis will step up when you inherit the property when they pass away (hopefully many years from now). You could keep the title legally in their name and send (up to the gift tax exclusion--$14k/yr per parent) rental income to your account with no taxes. You could also charge larger property management fees until inheritance, but that'd be taxed... Just ideas, but I'm not a tax professional--I'd recommend you consult a CPA. Hope that helps.

Hi Clarice! I just joined BP too and have been living in Singapore as an expat for two years (but about to move back to the US). A few questions that may help answer questions: 1. Are you a Singaporean citizen? This makes a huge difference. 2. Are you thinking of residential or commercial (including small businesses)? 3. Do you already own your own HDB or do you still have that credit? 4. What kind of capital do you have access to? Investment properties aren't cheap in SG relative to MY or ID My two cents on Singapore's property market from an expat former banker perspective: -cap rates (income-expenses before financing relative to property market price) went through the roof since people see limited land--peaked in 2015ish, but still outrageously low -interest rates dropped low enough to sustain borrowing on these low returns -building has continued without parallel demand growth (supply>demand) -Singapore employment regulations are being more and more protectionist (and an ageing population) so you won't see foreign labour growing significantly in the next 5-10 years IMO Personally, I would be more interested in Indonesian office/industrial/MF just from macroeconomic factors, but there's opportunities in every market if you find the right niche. Be warned that surrounding developing SE Asian countries depend a lot on who you know for regulatory issues and absentee ownership would be tough/risky. I've done a bunch of work in the Philippines have have seen friends get burned. (Carefully research assumptions that salespeople give on IRR projections). Probably more opinion than you were looking for, but I was excited to see another person from Singapore here (on the day I first posted too)!

Hello BP!

I've browsed your forums for a few weeks and it seems you have some quality information--I hope that this will finally get me into the trenches as a principal in RE (outside of REIT investing and helping to broker a REPE deal while I worked at one of the big investment banks).

Goal: ~15-20 unit Multifamily value add (likely hold) in WA State; likely urban infill class C/C-; 20%-30% down on a total deal between $600k-$1.5mm

Problem: I have been working in Singapore as a C-suite exec at a software startup for the past two years (offices in Singapore and Manila), but recently resigned and will be moving back to good 'ole America (Seattle) on March 1. I will not have a job upon arrival (hopefully that doesn't last long) and thought it'd be a good time to hunt/work on a BRRRR property. I doubt that any bank/credit union would count my last two years of foreign earned income towards any loan and it won't look good applying for my first property without a job. My credit is great (~810). I'll be buying the property through a single purpose LLC, but would be unlikely to consider a HML. So... here are my questions:

1. Can anyone confirm that foreign earned income doesn't count in the loan process (in terms of income history with personal guarantees)?

2. Would the commercial loan kill eligibility for a future FHA loan? (I've always lived in high end apartment rentals--current landlord in SG is making 2.25% gross off me hah!)

3. The investor group (2-3 people) I'd be tapping has a significant amount of liquid investments (much more than the deal size)--how would that affect the loan process? I would be willing to do a personal guarantee myself (liquid assets at the lower end of the deal size), but wouldn't ask for it from other equity investors.

4. Recommended books/podcasts/forum posts on apartment loans? Sorry, I'm sure they're out there, but haven't been able to find them.

I realize that these are mostly questions for the specific bank/lender... but I'd like to be prepared as much as possible before their discovery meeting. All of this is hypothetical as I haven't found a specific property--let me know if you need me to answer any other questions.

Thanks!