All Forum Posts by: Arun Iyengar

@Nhi Nguyen, with AB 1482 there are quite a few restrictions on getting tenants to leave without due cause. Alameda County also has its own set of issues, as I am sure you are aware. My approach in this area has been:

1. Make sure that your tenants are not violating the tenancy occupation rules. Typically, you may find apartments with more people living there than the lease. Provide them with a 3 day cure or quit notice immediately

2. Make sure there are no trouble makers - with other tenants, noise, etc which violate your posted rules. Provide them with a warning and if they don't satisfy it, then the appropriate number of days notice - either 60 days or 90 days (I think)

3. Make sure that your tenants pay on time and if they are late by a day, then provide them with a 3 day cure or quit notice.

The goal is not to remove tenants that are following the rule, but those that are not. In a well managed 12-15 unit property, this will give you at most 3 units that can be turned. Any such vacancy will allow you to remodel and reposition for higher rents. It is possible that your existing tenants may want to move into such a unit, and given that MTM position and your appropriate rent increase given in the last 12 months, you may be able to increase their rent by the allowable maximum, giving you another unit that you can remodel and continue the process.

Since you seem to have the right background, do make sure that no large deferred maintenance issues exist since that becomes another source of contention with providing proper housing to your tenants. Good luck.

I have dealt exclusively in Class C type housing for the past 6 years. The first decision is location. As long as you buy in a decent location, you are supporting the service level workers with Class C housing. If employment opportunities stay high, then demand for Class C will actually be greater than other classes. So your first step is to make sure that you are very comfortable with the location you are choosing. The days of easy money which was in the early part of this decade are getting scarcer, so picking a location that can weather the inevitable downturn is always my first priority, and then comes the asset class.

@Tom Camarda

Pricing is a deal by deal approach. Usually for an under-performing asset with a long term owner, you should expect a lot of deferred maintenance. That is how I would approach the seller with my pricing offer. $xxx for a fully functioning complex - $yyy which is cost to take care of all deferred maintenance = $zzz which is my purchase price offer

If you have never done commercial loans before, note that you will not get a 30 year fixed type loan that you might for residential loans. 3, 5 , 7 and 10 year ARM loans are common and rates will probably range from 3.5% to 4.25% (based on rates today).

Don't go to your residential insurance provider for your commercial needs. I found they had the highest premium. Instead, search through this website or other websites such as AOA to find insurance agents / brokers who deal with multifamily properties. They will know how to guide you since banks have some stringent requirements.

Good luck 

All the properties I purchased were with my broker acting as a dual agent. I found that once the broker got to know me and my approach to purchasing properties (i.e. not wasting his time or the seller's time), each time they became my advocate. In a bidding situation, I sought out the selling agent and wanted him to represent me as well so I could get an inside scoop on what the other offers looked like and what I had to do to succeed. With the right mindset, dual agency is not a huge hindrance.

It is time for me to create / update my trust. Does anyone know good attorneys that have experience dealing with multi-family asset clients in the San Jose area? The few I reached out to have either been unresponsive or ready to charge me huge amounts to create my trust

Investment Info:

Large multi-family (5+ units) buy & hold investment in Sacramento.

Looking for accredited investors that would like to participate in a 40+ unit investment in the Sacramento MSA. Own large footprint of apartments in this area already. Fundamentals stay strong even in these uncertain times.

Please contact me for details.

@Troy Remelski, 

I got into MF investing about 4 years ago by just jumping in. Like you, I had experience managing SFR and looked at MF as a larger scale version of the same. Of course, there are a lot of differences, but I could learn by doing. The best thing you could do is to get a few brokers, look at some recent deals that were closed, get a good broker for commercial lending and start analyzing a few deals. You seem to have the right background for getting up to speed on this type of analysis quickly. You can always post your deal details on BP and solicit feedback from other users to see if they would price it similar to your analysis.

@Diane G.,

Real estate pricing is very localized and while Santa Clara County is seeing pricing lower than expectations, homes in the peninsula and SF are still rising. In CA, I think Prop 10 repeal has some impact on perceived pricing of rental properties and the results from November voting will give us more clarity on whether prices will start going up again or drop further.

@Ben Bymaster, college is the place to learn safely. What does that mean - it means that you can take all the classes you need to be a successful investor, manager, financial planner, ethics and legal reasoning etc with the only penalty being you get a grade less than desired and of course you are spending for college. In addition, you can form good relationships that can serve you later on in life as your peers also get successful.

You can learn all the things by jumping straight into becoming an investor, but the cost of not knowing something and learning can be costly. In my case, I decided to get an MBA and found that while pricey, it offered me all the basics I needed to know and the skills to learn more without letting the fear of the unknown impede my progress. I compare that to people I know that are successful in their jobs but just can't get over the fear of the unknown to become real estate investors.

There are well known people that did not go through college education to be successful, but there are also a large number of others that did not help themselves by lacking one. Ultimately that decision is a personal one and I hope you do the decision justice by looking at it from both sides.

Good luck.

@Andrey Gorokhovskiy, if you can be cash flow profitable with the new loan (larger amount and higher rate), then you will have freed up cash to buy more. My approach is to fast forward to a steady state on the new purchase (if there is any value add work) and then add the cash flow of the new property to the old one with the larger loan and if that is equal or greater to your current cash flow, you have a good target. 

I am a big fan of multifamily properties and continue refinancing them anytime my equity goes over 50%, bring it down to about 30% (or the least the bank will allow me to be) and take the delta and purchase more properties.

Hope this helps.