All Forum Posts by: Andrew Campbell

@Account Closed  The cash flows will pay for the 8% preferred return.  We target deals that return 9%+ Cash Flow.  The majority of the returns will occur when we either sell or refinance the property. 

@Jeff Banky, I'm finding cash flowing deals in Texas--specifically San Antonio and pockets in DFW.  And all the major metros in Texas have the stable markers of growth. 

We have a 192-unit in San Antonio under contract that has strong cash flow from Day 1. 

@Brian Adams nailed it.  Only thing to add, and consider.  If you are going with a local bank and its your first deal, you are likely looking at full-recourse debt.  So the guarantors (including yourself) will need to be comfortable with that.  Once you can get into agency, non-recourse debt I think you'll find it easier to attract a sponsor. 

Best of luck! 

Agree with @John Leavelle--what are you goals?  That will guide your decision. 

IMO, the advantage of real estate vs other investments is the ability to leverage your money.  I would opt for option C for all the reasons stated above--easier to manage, single loan, efficiency of multiple units, etc.  

I just posted an article outlining why we focus on bigger complexes--the moral of the story is to go as big as you can.  

Good luck!

@Todd Dexheimer, we are pretty similar in structure to what you have. Value-add on Class B deals. We target 9% CoC return and 16%+ IRR, close to 2x multiple over 5 years. Like you, plan to beat those expectations to create happy investors.

Only thing different is we have an 8% preferred return, and we get our asset management fee (2% of gross monthly rents) paid after the pref. 

Congrats @Ivan Barratt.  Seems like solid returns for a light value add. Was it a marketed property or off-market deal? 

@David Smith, I think 5-units are the toughest properties to invest in.  To directly answer your question, I'd look at community banks for financing as they'll be your best (and maybe only) option. 

Here's why I'm not a huge fan of a 5-unit:  4-units are treated as personal properties and you can get personal loans on them--30-yr fixed rate.  5-units are commercial properties, so you are you looking at whatever terms you can get from a bank.  Best case, that's likely going to be 25-yr amortization with a 5-, 7-, or 10-year term, and an interest rate higher than you'd receive on a duplex or fourplex.  Operationally, the 5-unit isn't going to be much more efficient than a 4-unit but the bank terms are far inferior. 

I wrote an article a while back about how we built our portfolio--step #4 is buying in your name to take advantage of those loans.  I'm not saying you can't make money buying 5-units but I'd really encourage you to either find a 4-unit or look for a 10+ unit. 

Best of luck!

Tax assessor is the best place.  You can usually find not only who owns it (or their entity) but a mailing address, when the deed changed hands (how long they've owned it).  As already mentioned, you'll need to do some digging if its an entity, but a great place to start. 

Dept of numbers is a great source.  

One thing not mentioned so far is the qualitative factors that go into your decision to invest out of state.  Are you going to be completely hands off/turn-key, or something you are more actively managing?  How easy will it be for you to get there? 

I started by looking at the all cities I could get to in a 2-hour non-stop flight--then started researching and prioritizing within that window.  Even from a research/getting to know the market standpoint I want to be able to get there quickly and easily. From there, you can follow much of the advice in this thread to identify metrics around job, population growth, etc.  

Good luck!

I agree with @Jeff Greenberg about your competition and what tenants you are trying to attract.  Nearly all the properties we look at and operate in Texas have pools, its almost a must--particularly in the 100+ unit space you mentioned.  

If that is a standard amenity your tenants are going to want and it adds value to their lives, I chalk it up as a cost of doing business.