All Forum Posts by: Arun Iyengar

@Fredie Robinson

This question comes down to personal preference, and possibly 2 options.

If you are a person that is not interested in carrying debt for longer time, you should go with the 15 year, go through the early years of low cash flow and then as rents go up, have the benefit of a 15 year loan plus getting increased cash flow.

If you are a person that is okay with continuing to carry debt, then I would recommend that you actually choose a 30 year amortization so that you can maximize cash flow. My approach has been to make sure that I don't lock up too much equity into my property making me equity rich, but new deals poor. I end up cash out refinancing my properties within 2 years after buying them to take advantage of the value that has been created, and use this new cash to buy another property.

Good luck and happy investing.

Thanks for all of your feedback. 

@Jeff Greenberg do you put any money down on your deals?

@Salvatore Lentini I agree with you that if the deal is not attractive to investors, there is no point talking about my % of the cut! Good point about the finder's fee.

@Joseph Gozlan Makes sense that the more effort you put in, the higher you would want your equity percentage to be

@Scott Krone 20% IRR is really good and a dream for the investments in the pricey bay area market. I presume that if your deal is well above 20% IRR you take a larger equity stake?

@David Thompson Thanks for the detailed response. Agree with the risk reward approach you indicate for exceeding expectations. Also agree that the syndicate should have flexibility in thinking about its investors first.

@Joel Brown,

There is a concept called RUBS or (Ratio Utility Billing System) that you can use when you have  a single utility meter servicing multiple tenants. You can search that in your area and see the providers that would help you set this up.

I get requests from friends to invest and manage their investment in a multi family building. My question is:

1. What rate of rent do you charge as management fee for yourself, assuming you still contract with a 3rd party property management company? For example, charge 8% of which a larger portion goes to the property management company and smaller to you?

2. What % of ownership do you retain for yourself, even if you did not put any money down, to grow the value of the property? For example, own 20%, but such ownership is only above the purchase price valuation?

Feedback from experienced syndicators would be appreciated.

I had the same challenge as well! I could not message you - the system would not take your name and kept deleting the name.

@Ashton McCants,

To analyze this deal properly, I will need some more data. How much are you planning on paying for the property - $129K? If yes, how will the current financing of $70K be accounted? You are paying nothing down, so somebody will have to pay off the existing loan so you can get the full title, or is that loan being transferred into your name? Are there going to be 2 separate loans, one with the existing company for ~$70K (at what rate?) and the second with the seller for $59K (at what rate?)? You can send a message directly if you want.

@Ashton McCants,

Assuming you purchase this property for $129,329, put 20% down and get a 30 year mortgage for 4.5%, get $1,150 per month in rents, you would be cash flowing $3,135 per year.

However do note that rents from Zillow are not always accurate and you should check rents on Craigslist, Apartments.com or some other website to correlate that landlords are asking and tenants paying the $1,150 per month.

Hope this helps.

@Casey Miles,

I see this in listings in many areas. With the threat of increased interest rates, it is interesting to see that there are more buyers than sellers.

@Chris Mason,

I agree about the people first aspect. Good to know about the avenue through the lender

@Bejtush Bajrami,

I tried to run your numbers and had to use a very high interest rate (7.6%) to match your mortgage numbers. With that, here is the calculation:

Purchase Price = $385,000
Down Payment =$77,000
Loan Amount = $308,000

Gross Income = $51,900
Less Vacancy of 5% = -$2,595
Effective Gross Income = $49,305
Gross Rent Multiple = 7.42 --> Use this to check and see if GRM is in line with similar properties

Expenses (Using your numbers mainly):
Property Taxes = $6,300 
Insurance = $1,500
Heat & Water = $8,000
Maintenance & Repairs = $2,595
Total Expenses = $18,390

Net Operating Income = $49,305-$18,390 = $30,915
Cap Rate = 8.03% --> Use this to check and see if cap rates are in line with similar properties
Subtracting Annual Mortgage from NOI = $4,819 in net cash flow or 6.3% cash on cash
Adding back principal reduction, gives Total Return of $7,603 or 9.9%

I look for a minimum of 10% on the Total Return line (given the expensive real estate where I live). Your property would pass the Total Return for me in California. However, you should first check out the Cap Rate and GRM before you get to the cash on cash or Total Return to make sure you pay the right price and that the property generates sufficient cash for your troubles.

Hope this helps and good luck.