All Forum Posts by: Andrew Cushman

@Kenneth Garrett, I would concur with @Michael Le - get Rod Kleif's book.  I have not personally read it, but he is legit and the price is right!

Beyond that:

Two great books I have read and would recommend are both by Dave Lindahl:

Multifamily Millions

Emerging Markets

While I have not read the following books myself, other people I respect have recommended them:

Steve Berges - The Complete Guide to Buying and Selling Apartment Buildings

Craig Haskell - How to take an Apartment Building from Money Pit to Money Maker

There's lots of great podcasts, too, which should supplement your book reading. Here are some of the ones I regularly listen to, two of which you already mentioned:

Bigger Pockets, especially episode #170 jk ;-)

Best Real Estate Investing Advice Ever - Joe Fairless

Real Estate Investing for Cash Flow - Kevin Bupp

The Commercial Real Estate Show

The Lifetime Cash Flow Through Real Estate Investing - Rod Khleif

Apartment Building Investing - Michael Blank

I hope that helps!

Andrew

@Todd Dexheimer and @Antoine Martel - accurate and useful information with no sales pitch.

2. The Multifamily Executive conference, which is held every fall in Las Vegas.  I have gone to this one every year for the last 5 or 6 years.  It is largely what it sounds like - a collection of generally higher level people from brokerages, management companies, apartment developers, vendors, etc.  Great speakers, good market intel, and decent networking.  An industry event with zero sales pitch or gurus. Not as many small to medium owners/investors though:

http://www.cvent.com/events/2017-multifamily-execu...

3.  National Multifamily Housing Council (NMHC) annual meeting.  This is the granddaddy of them all when it comes to networking with brokers and other medium to large owners.  Another one I attend almost every year.  It's like speed dating for investors and brokers.  Most people - myself included - hop from one broker meeting to the next.  In one day I can get face to face with 12 brokers from across the entire area I invest, and have bought off market deals shown to me at this conference.  Downside:  membership in NMHC is $5k/year, and that's before you pay for the conference.  However, you might be able to get someone to sponsor you for a networking only pass which is usually only $400 and is all you really want anyways.  Also, a fair number of people just show up, network, and don't attend any of the official stuff that membership is required for...but you didn't hear that from me ;-) 

https://www.nmhc.org/Meetings/2018-NMHC-Annual-Mee...

4.  Middle-Market Multifamily Forum.  I have not personally attended this but have heard other investors speak well of it.  Based on the name, it sounds like it has potential as well:

https://www.imn.org/real-estate/conference/Middle-...

5.  Dave Lindahl's Apartment Riches Bootcamp.  Ok, yes this is a guru's course, and there will be some upselling.  However, a couple of years ago he did it here in LA, so I went out of sheer curiosity since it was in my backyard.  I had already bought 1,200 units at that point, so I wasn't expecting to have any major breakthroughs.  I will say that 90% of the time was spent delivering actual content, and the information presented, in my opinion, was accurate.  It is also a great place to network with like minded people and find potential investors, partners, sponsors, etc.  I will say I have not heard good things about the coaching program though,so proabablt best to stay away from that:

https://www.reiclub.com/products/475

6.  Finally, the two @Jeff Greenberg mentioned I have heard good things about as well, and I listen to those guy's podcasts.  I have not personally been to the conferences.

There are others, but this is a start.  I hope this helps!

Andrew

@Frank Glenn you are never too old to get good returns! :-)  One of my most frequent private lenders is 78, and a number of my apartment investors are in their 70's.

As @Dmitriy Fomichenko mentioned, the key to using your 401(k) money is to have it in a self directed IRA that lets you invest in assets other than stocks, bonds, and mutual funds. This generally means transferring it to a custodian such as Pensco, Entrust, Quest, etc. I have personally used the first two and overall found the experience to be satisfactory. Here's a fairly thorough directory of who is out there:

http://selfdirectedira.nuwireinvestor.com/list-of-...

One caveat: moving your 401(k) away from your employer may remove it from the protection of ERISA, which is basically a law that makes your 401(k) untouchable by creditors, hungry attorneys, etc.  If you're concerned about that, please talk with your attorney and HR person.

Once you have your funds in a self directed 401(k) or IRA, the options are many. As @John Thedford said, you can make hard or private money loans, which often carry rates of 8-15% plus points.  You could also invest in other people's deals by participating in syndications, or just buy real estate outright.  There's plenty of options outside of real estate as well. If done properly, these investments generally tend to give good returns without the volatility and unreliability of the stock market.

I hope that helps!

Andrew

@Sergio Fetter, that's a good question.  Over the years I have had a number of list brokers reach out to me - some rather aggressively - to try to sell me a list of accredited investors.

I've never had any need to or interest in purchasing a list, however the one guy I did talk to for a few minutes gave what seemed to me pretty high prices for a product (the list) of unknown quality.  As @Ivan Barratt mentioned, by the time you get the list many other people likely have already tried to use it, and that's assuming the people on the list are actual accredited investors to begin with (which you basically have no way of verifying!).

@Percy N. really hit the crux of the matter though: people invest with you because they trust you and like you, and that comes down to relationships.  While I'm sure a small percentage of people do, I don't personally know anyone that has made a major investment from a cold call. The best way to get started is with your existing circle of influence, as well as the methods Percy mentioned.  The good news is this:  once you do a good deal or two with your first set of investors and prove yourself, they will start referring other investors to you and your business will start to grow exponentially from there.

Finally, what @Lennon Lee said is critical as you do NOT want to get on the bad side of the SEC!  If you don't solicit and only take investors that you have a preexisting relationship with at the time of your deal, you can syndicate under rule 506(b), which is generally cheaper, easier, and allows you to take "sophisticated" investors.  Once you start soliciting, such as mailing or calling a list, you have to operate under 506(c), which is more complicated and puts a lot more responsibility on you.  Both are valid ways to do it, just make sure you use the right way!

Good luck!

Andrew

@Kurt Jones, like @Jeff Greenberg said, it doesn't matter where your syndication attorney is based.  The reason is this: syndications are regulated at the federal level by the SEC, not the states.  The states might have different filing requirements, but that is a very minor piece that any good syndication attorney will handle. Your syndication attorney will never go put his boots on the ground ;-)

I have used Gene Trowbridge for many syndications across the country and have always been happy with him:

https://www.crowdfundinglawyers.net/gene-trowbridg...

Kim Taylor, who Jeff mentioned, actually used to work with Gene before she moved to Florida.  My experiences with her were good as well.

One side note: If possible, you do want the attorney drafting your PSA (purchase and sale agreement) and representing you during the transaction to be from the state the property is in.  That is where having someone familiar with the nuances of each state can be helpful, since many states handle the buying and selling of property differently, or have obscure laws/practices that would be good to be aware of.

Andrew

@Maggie Vineyard, as @Joel Owens mentioned the $3-$4 million space is very crowded with buyers in most markets.  But that doesn't mean you can't find a deal!

While TX is a good MF market and has good fundamentals, I recently sold off most of our portfolio there.  The biggest problem with TX is that everyone and their mother knows about it, including equity from outside the U.S.  Thus prices get bid too high from people who either don't know what they are doing, just need to get capital placed and worry about the consequences later after they get their fees, or don't need to get high yield (if you're from Europe 5% sounds great!).

For me, I like the Southeast in general - SC, NC, GA, TN, and FL.  There's other great markets scattered around the country in addition to these.  Since you are looking at a longer term hold and are yield focused, some of the secondary and tertiary markets within these areas are probably your best bet.  Determine some markets you want to be in, and then start forming good relationships with the brokers that cover them.  Eventually you'll start seeing the good off market deals.

Another good strategy is to focus on value add, which is what @Cody L. alluded to. You're going in cap rate might be low, but if you can improve the property and run it better than the seller, your final cap rate can be much better. For me, I don't even look at cap rates other than for the exit - I focus on cash yield and IRR.

The above works, even though the market is very competitive.  Last Friday I closed on a $3.2 million dollar property in a secondary market in GA.  The cash-on-cash return will be double digits within a year or two, and the appraisal came in at $3.8 million!  I'll take that any day :-)

Good luck!

Andrew

@Adam Sheren, I've syndicated 1,646 units in the last 6 years, so here's what I would say based on that experience:

1. As @Bob Lachance mentioned, analyzing an apartment property is not something you leave to software.  Every property is different and can have many nuances and variables that automated software will not do a good job accounting for.  For me, I have a custom Excel file that I have built over the years that works very well and that I understand the inner workings of.  However, I can understand how many people wouldn't want to do that (the point is Excel is more than sufficient)! So I would take @Junior Salters' recommendation and get Michael Blank's analyzer, and as you use it study how and why it come sup with the numbers it does.  While I have not used it myself, I have not heard anyone say anything negative about it.

2. For your proforma or Investment Package, that is something you can outsource but not automate (at least not well). For me, my Excel spreadsheet automatically creates all the financial tables that get copy and pasted into the Investment Package. I believe Blank's analyzer does the same (someone who knows for certain please correct me if I am wrong). My office manager writes a lot of basic market related stuff, and any graphics are outsourced to a VA or someone from fiverr.com. Then at the end she takes all the parts, puts them together, corrects formatting issues, and makes it look professional. But when it comes to the critical stuff - the deal analysis, business plan, financial proforma, etc. - I write that. As the sponsor, you should know the deal better than anyone else, and you want that to be obvious to the investors. And it helps when they have questions - you'll know it cold since you wrote it!

3.  For property management, we have 3rd party property management, and they use Yardi to manage all of the financials at the property level.  There are a handful of good programs out there for that.  Regardless of what program they use, the management company (or you if you are self managing and purchase a license for a program like Yardi) should be able to send you all kinds of reports: trailing 12, rent rolls, delinquency, etc.  You could in a sense automate investor reporting by having some of these reports packaged and emailed to them, but in my experience most investors won't find this very useful.  Most investors are going to want to get a well written prose update in addition to financial info.  Until you really scale and have other knowledgeable employees or partners, the best person to write that is typically you!

Successful syndicating is really based on 2 things: finding great deals, and good investor relations.  While lots of pieces can be outsourced, they don't lend themselves well to automation.  

Andrew

@Kenneth Garrett, it somewhat depends on the size of property you are looking for. Smaller properties, say 10 units or less, are often mispriced on the residential MLS and can present opportunity.

The various websites you listed can be helpful as well. I subscribe to Loopnet, although the main purpose is to track what's happening in the market and to know what brokers are listing what. Generally speaking though, most of the best deals never make it to CoStar, Loopnet, or the MLS. Where are the best deals? As @Chris Tracy mentioned, the best off market deals will come from taking the time to build relationships with good brokers.  Call them, analyze the deals they send you, follow up (CALL, not email) as to why it does or doesn't work for you, and repeat until you start seeing the good deals.  This is especially true if you're looking for bigger stuff, say 50 units or larger.  Also, you can go to the broker websites and subscribe to be on their email list so that you get emailed all the new listings (for example, https://www.berkadiarea.com/search-listings.cfm).

Another way to get smaller off market deals is through direct mail - reaching out to the current owners of the property.  I don't recommend it for the big stuff, but I have met guys who very successfully buy smaller deals with direct mail.

Good luck!

Andrew

@Kurt Jones, I own property in FL that has some smaller units.  We're in the panhandle, so there are a few nights where heat is nice.  There's a variety of setups, but as @Jaysen Medhurst mentioned these are great:

http://www.mitsubishicomfort.com/wbu/?utm_source=g...

For a bedroom around the corner, we've found three effective solutions:

1.  Oversize the main unit, and install ceiling fans to circulate the air around the unit.

2.  Install two smaller units, one on the main living area and one in the bedroom.

3.  Install a big enough unit in the main living area in a location that lets you install a short duct through the wall into the bedroom and direct some of the cold air that way.

Option 1 is the cheapest but least effective.  We usually go with Option 3.

Good luck!

Andrew

@Katherine Lankford, overall Georgia is a great place to invest in multifamily (good demographic trends, business friendly, etc.). and as @Ryan Beasley and @Eva Oliver alluded to, there are lots of small, good markets scattered around the state.

While I own a lot of multifamily, I am not a student housing expert.  However, as long as you manage it properly student housing can be extremely stable, reliable, and recession resistant.  There are tons of smaller, good schools scattered all over the state that would make for good student housing investments.

I would be a little more careful with military housing, and even towns where the economy is heavily dependent on the military base.  While military cuts seem unlikely in the next 4 years, even something as simple as troop deployment (North Korea anyone?) or realignment can have a major impact.  For example, last year a couple thousand troops were moved away from Fort Benning in Columbus, GA.  For properties near the fort, this had a major impact as those troops and their families suddenly left (military personnel are allowed to break their lease if the move is due to the military.  So, if your property is 50% military tenants, it's possible your vacancy can go up 50% almost overnight!).  But here's where it gets really interesting: guess what the base did with their empty on-base housing?  You got it - they started renting it to the public at way below market rents just to have them full.  How do you think that affected nearby apartment owners?

Finally, lenders tend to be a bit wary of properties that have a "concentration" of any particular group such as student, section 8, military, etc.  So be prepared to possibly have to work harder to find a good loan.

Personally, I don't invest in military dependent properties, or small towns that are heavily dependent on a base or single industry that could shut down and kill the town's economy.  I'm not saying don't buy a property just because it's near a military base, just go into it with eyes wide open.  Always consider the possible downside!!

Good luck!

Andrew