All Forum Posts by: Ashton Levarek

Hello BP 

So my team and I are looking into a new market, well new to us anyway. We primarily invest in Commercial Multifamily properties in Raleigh, Durham, and Fayetteville, NC - although we do sometimes buy and hold small multifamily when it makes sense. 

But we have just recently branched out to cities like Greensboro and Winston Salem, NC.  

So my question is more directed to those investors that are working in and around these markets, primarily Greensboro NC. Anyone have any rockstar Property Managers they can recommend for Greensboro?

And at the very least, whats your take on the market? Specifically - Population growth, Job Growth and unemployment? 

Thank you and look forward to your responses. 

Investment Info:

Large multi-family (5+ units) commercial investment investment in Fayetteville.

Purchase price: $950,000
Cash invested: $25,000

Contributors:
Ryan Daigle, Chris Levarek

16 Townhome style apartments, 2 bed/2.5 bathrooms. Purchased at $950,000, raised the capital from private investors. Current rents average $620/unit, market supports $800+/unit. Plan in place to spend $3,000/door in rehab in order to raise rents to market value.

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

The strong renter market, the price of course and the value add opportunity.

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

Working with a local multifamily broker that we had developed relationship with. Once we got the property under contract we had our contractor and our PM walk the property with us, after discovering quite a bit of deferred maintenance we showed the seller how much repairs were going to be in order to get his up to market value, at which point he lowered the price and mades ome repairs him self. To include adding 4 new HVAC units.

How did you finance this deal?

We raised the capital through a 504 offering.

How did you add value to the deal?

We employed a professional management company as well as began rehabbing each unit as they became available, i.e. as leases expired. Plan is to spend approximately 3k/door in rehab costs, which will allow us to raise rents from $620/door to $825/door.

What was the outcome?

Rehab and value add plan is currently underway. But by year 2 rehab should be finished and all rents should be at market value.

Lessons learned? Challenges?

Everything must go on the HUD. EH-very-thing! To include rental deposits - seller is currently disputing whether we are due the rental deposits or not.

Also if you are going to syndicate, do not use a 504 offering, even if the lawyer advises it. In a 504 offering they have to research and verify the laws of each state that each investor has residency in. And if your investors are military, they probably all come from different states, which can get pricy. - recommend a 506b instead.

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

Michael Glaspie from Five Pillars Realty and Spoat Jackson Brown Property Management.

Team work makes the dream work because - "No one is smarter than all of us." -Jim Rohn

Clear goals are best achieved through Strong Desire and Consistent, Focused Action. 

Failure, was never an option.

@Ben Feder

I'd have to agree with @Scott Passman and @Account Closed, we use both of those methods. But in a specific order. When the deal comes in we try to analyze it fairly quickly to see if its even worth the deep dive, the request for info, the calls to local utility companies etc. We basically look at the price, the NOI and the market cap rate, do a little math and get back to the broker or seller. Basically math looks like this

This way we can get our response to the seller quick, avoid wasting time on research, and give them a reason to start providing expense reports, T12 etc. Once they do that we can start really diving into if they are correct, what we can do to decrease them etc.

Long story short, we start with 50% expenses until we have the complete picture. The goal is to be the first ones to start negotiating and working with the seller.

Hope that helps, all the best. 

@Anthony Zotto

Highly recommend "Best Ever Real Estate Syndication Book" by Joe Fairless. Our business model almost follows that book step by step, very helpful.

Best of Luck

Respectfully

Ashton

@Ruslan Kotelyanets

Yes. You should absolutely invest in large multifamily apartment deals. The returns are better, forcing appreciation is easier/better, loans are better, economy of scale is better and best of all YOU DONT HAVE TO DO IT ALONE! Apartment investing is a team sport, and all you need to do to be on the team is know what you’re good at.

Everyone that says no, you need an education first, you need to start small to get comfortable, you need to build up to it - this is absolutely true.... for them.

Everyone’s journey is different but when you learn how to work with and leverage other people’s skills and expertise then you will truly be able to scale into success. There are plenty of seats on this train, if all you like to do is analyze deals, or raise money, or manage rehabs, or network, then there is a place on the team for you. Multifamily investing is a team sport, just have to find others good at what you hate doing. It’s very rare that I meet someone that enjoys, and is good at everything. Some people aren’t good at anything, but guess what, there is still a spot on the team for those people too (they’re called passive investors and should be what everyone aspires to become, just using money to make money).

Point is find the team, network with people of like mind and different skill. Don’t think small because everyone else does. A year ago we had no deals, today I’m negotiating a 21 unit, a 30 unit and a 48 unit college housing apartment complex. All in separate cities. But I’m only able to do that because I have the team in place to do what I suck at so I can pursue what I’m great at, and most of all, what I enjoy.

Massive dreams require massive action. “Everything you’ve ever wanted is on the other side of fear.” - George Addair

Hope that helps, best of luck.

This seems like such an obvious question but basically I'm looking at market cap rates and based off of the current NOI, and often even off of the projected NOI, properties are just not projecting returns even close to what investors (like myself) and mortgage brokers would want to see (DCR 1.25%, CoC 9%, IRR 15%). (Buying using current NOI to establish property value does not produce an offer even close to what sellers want to sell at because sellers look at market cap rates to determine the right sale price.)

But if I adjust the purchase price to reflect the market cap rates, adjust the value to reflect projected NOI, and then adjust the RESALE price to a similar cap rate (reflecting the current market cape rates), well then it works.

But the issue I have with that is that now it seems that I am purchasing based on speculation of what it could preform at as well as what it could sell at. And while it is very likely that I can get the property to preform at the projected NOI - the cap rates I'll see in 3-5 years, when I sell, will not be something I can control. And this will ultimately affect my CoC/IRR/AAR.

Thoughts? Suggestions?

Looking forward to your input.

Hey @Ryan Jones

I'm actually in the Tigard area, just south of PDX, and we are multifamily investors as well. But I can tell you now that I do not have, nor is it likely that I will ever have rentals along the west coast. The laws combined with the prices and taxes, they just do not compete with what we can find down south and along the mid Atlantic states. In fact almost all of our investments are in North Carolina, primarily Raleigh Durham area (although two are in AZ) but the purchase price vs rental prices out there just work better for us. And this is just reflective of the ever increasing job market out there, after all where ever the jobs go... the market grows.

Hope that helps, if you have any other questions please feel free to reach out. All the best. 

Ashton

Looking forward to it @Ryan Daigle, should be fun.

@Matt R. yes- I finally decided to go with the "do it right the first time" method and taking off the wallpaper THEN painting over it (hiring someone though to get the job done for sure!)

@Rob B. yeah, was thinking of maybe simply adding some hardware to cabinets, adding backsplash & some under cabinet lighting-seems changing out the current cabinets would be a little out of our budget-thanks!