All Forum Posts by: Ankit Patel

In the end, your knowledge of the market will help you understand if someone is trying to sell you a good deal or a lemon.  If you can build a network and just give follow a trusted friend it may be easier and you won't have to necessarily learn everything.  In most cases, you will have to learn.  Here are some of the steps I am taking to get into commercial multifamily deals.

1) Networking with other investors that are in multifamily in my area. Building a relationship with someone that is already doing multifamily is the quickest way to getting your first deal. Telling investors your goals and asking them for good real estate agents that they recommend and things to watch out for in the market.  Going to a local conferences really helps!

2) Calling agents and telling them your goal, what you want, price range, etc. Some agents will find you good deals and some will not.  No matter what you have to do your due diligence on the properties and ask the agents questions... They are obligated to tell you the truth but only if you ask.

3) Reading up on local legislation, so you know if something in the market is shifting. (housing laws change all the time and they are different in multifamily vs residential)

4) Start getting info on local sales, then follow up with the listing agent and ask why someone bought the property, figure out how much it sold for...

5) Understand Type A, B, & C apartments and general apartment lingo. Agents can tell when someone is new to buying commercial and will take advantage, having the right questions and verbiage will help them take you seriously and will help you understand if an agent knows what he's talking about or if he is also new to selling multifamily.

6) Look at how many new buildings are being constructed and when they will finish, this may affect your rental prices.  See if the market is saturated or there is a big demand for housing, different areas have different demands.  An apartment building can go up for sale if the competition gets tough as well.  Usually, a high-end apartment will sell after 5-10 years with one owner because maintenance costs are about to go up. You have to look into when the property was built and how long things generally last until they need to be replaced. Think of a car, most car owners will try to sell before they hit 100K on their car to avoid the major maintenance the need to do on their car.

That's just some info off the top of my head...a little long but I hope it helps.  I think connecting with the community of investors is the best way to go about it.

Investment Info:

Other commercial investment investment in Eureka.

Purchase price: $1,925,000
Cash invested: $577,000

30 Room Motel in Northern California. Franchised property bought from a couple that was retiring, the business was an owner-run property.

What made you interested in investing in this type of deal?

The CAP rate was high (10%) and I saw there was room to make enough to hire a manager.
I knew a bit about the hotel industry from family and friends and wanted to get into it.

How did you find this deal and how did you negotiate it?

I was taking a road trip and saw the property for sale on Loopnet. The next day I negotiated the price down with the owner by 40K.

How did you finance this deal?

Bank Financing - I found a local small bank. All the big banks did not want to lend on a small motel.

How did you add value to the deal?

I needed more time to close the deal but the owner was in the process of closing on a house, in good faith I bought the house with the down payment and extended my time to close. The buyers were VERY happy and are always helpful when I need it.

What was the outcome?

A great transaction, decent price, and good financing.

Lessons learned? Challenges?

Buy a bigger hotel...the challenges are the same as buying a small one. However, if you want to do risky things i.e. start a boutique, implement new technologies etc. Start small.

Buy a hotel with managers and not owners running the property. Owners usually do better in business than employees and this is not intrinsically seen on the P&L. If you buy the place and have a manager running it the business will go down then if you were running it.

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Yes, David from Amber hotel group.

Investment Info:

Single-family residence buy & hold investment in San Francisco.

Purchase price: $1,100,000
Cash invested: $220,000

Fix and Hold type of investment. Property has an easy expansion possibility in the garage, which will add 1000$ per sq/ft in value to the house. I bought it because of this value add, the rental income was to low for it to make sense.

What made you interested in investing in this type of deal?

1) The garage was big enough to add another room w/ bathroom.
2) The house had not been updated since it was built. An easy facelift would increase value, as confirmed by a few fix&flippers.

How did you find this deal and how did you negotiate it?

1) Having a real estate agent that was a good listener and one who stayed calm while I was in a hurry.
2) Negotiating and Buying the day before Thanksgiving - there was no competition and I negotiated 20K off the price.

How did you finance this deal?

At first, we tried to use a broker and he failed us! One week before my time was up to finance the deal, I had to find a hard cash lender that quickly gave me a bridge loan. Then I took my time and found a very good bank with very good terms and interest rate.

How did you add value to the deal?

Closing it quickly

Lessons learned? Challenges?

Always apply to multiple banks immediately!

Did you work with any real estate professionals (agents, lenders, etc.) that you'd recommend to others?

Real Estate agent - Ryan... message me and I will dig out his contact.