All Forum Posts by: Tony S.

Any structure is possible, though I would think your equity position would be small for this kind of scenario.  It also all depends on what you negotiate with the owners you work for.  Typically I would expect this type of arrangement to be negotiated when the deal is being put together, not on any existing apartment complexes you service.  So I would pitch to your current owners that on the next deal they underwrite, you'd like to explore an equity arrangement in exchange for your project management services. 

If according to their underwriting an equity position of 5% ownership over the life of the investment will equal the sum of your salary over the life of the investment, I don't see why they wouldn't agree to that arrangement.

It's all up to what you agree to with your girlfriend's parents.  I personally would pitch a 50/50% split and take no acquisition or management fee.  If they're not asking for more than that, I think that would be a fair split on your first deal (they're the money/guarantor partner and you're running the deal).  

Once you start bringing in more investors (outside of your girlfriend's parents), I don't think you'll be able to get away with a 50/50% split (investors will probably demand a higher equity position and possibly a preferred return).  Here, you would take a smaller equity position but pay yourself acquisition fees, management fees, and transaction fees.

Awesome!  Keep riding the momentum!

I'm networking with local wholesalers to search for motivated sellers of multi-family properties and will have no issue purchasing one from a wholesale lead if the numbers check out.

Wow, thanks all for your excellent input!

Below is list of preliminary questions I plan to ask various property management companies in my market this week before choosing one to manage my multi-family, value-add property (once I find and close on the deal). Please let me know if I missed anything:

1.How is your management fee calculated? What does the monthly fee include? (Note: Request a price sheet of everything that’s not included in the management fee.).

2.What kind of properties do you specialize in managing? Can you provide me with a few addresses of properties you manage? (Note: Visit those properties, inspect the overall cleanliness, and shop the property as a potential tenant to see how proactive they are in getting you to fill out an application).

3.How long have you managed in this market and how many units total do you manage? (Note: they should have been managing the type of your property for at least 5 years).

4.Do you provide written management plans for your clients?

5.Do you have a tenant retention policy? (Note: Red flag if the property manager cannot provide a tenant retention policy).

6.Do you have a marketing plan to attract tenants, and if so, what does it look like?

7.How long does it take for a typical unit to be made ready after a tenant moves out?

8.How quickly do you schedule showings and return phone calls for potential applicants?

9.How do you screen the tenants?

10.How quickly does it take you to approve tenants and have a lease signed?

11.How often do you communicate with the owner? (Note: Try to obtain various sample reports generated by the management company for their clients).

12.Is the maintenance performed by your staff or outside contractors? If it’s kept in-house, what are the current hourly wages? If contractors are hired, do you obtain multiple bids?

13.Do your managers go through any type of special training or continuing education courses?

14.Will there be an individual property manager assigned to my property, who will that be? (Note: Meet and vet the individual property manager.)

15.Will I have signing authority to the bank accounts where the management company keeps revenue generated from the property? (Note: You must have the ability to sever ties quickly and not have the management company hold your bank account hostage.).

16.Does the contract have a cancellation clause allowing me to terminate the contract upon 30 days’ notice? (Note: You should have the ability to terminate for nonperformance.).

17.Do you just manage or do you also sell? Will I be required to list my property with your company when I want to sell it? (Note: Do not accept a clause in the contract requiring you to list the property with the management company.)

18.Why should I use your company? What do you offer that sets you apart from other companies?

19.Have you been sued in the past 5 years?

20. Do you have any references of current owners you manage the property for? (Note: Get at least three and call them).

The main takeaway I'm getting here is to prioritize having the money lined up ahead of time.  

James, I'm sourcing my deals with direct marketing, driving for dollars, contacting owners directly by driving to the listed address on public records, networking with existing landlords/resident managers to get the word on the street. I've contacted a few brokers but am getting bad deals from them, or they're just not taking me seriously (probably because I don't own a MF property, yet).  

I'll keep everyone here posted on my progress with the capital raise and the deal flow.  

Dear seasoned multi-family property closers,

How did you manage the massive list of to-do items and the many moving parts to buy your first multi-family investment?  Did you have everything lined up and figured out before finding the deal? Am I doing enough below to get that first deal?  

With cap rates so compressed, I'm looking for that off-market value-add play in an emerging market  (my backyard).  I'm actively identifying under-managed multi-family properties (2 to 50 units), doing my research into the owners of record and opening up dialogues on potentially making an offer.  

I've created a list of banks to visit to shop loans.

I have a list of property managers to call and vet to find that perfect match for the value-add strategy.

I've already got a great relationships with contractors/subcontractors with my background in construction and my experience owning and managing two rentals.

I'm going to as many networking events I can to tell everyone what I'm doing.  I'm also researching the criteria I can offer investors on their contribution to the down payment to acquire the property so I can begin soliciting friends and family.

Big picture-wise, am I missing something or do I just continue on this trajectory in hopes that one day I can call myself a multi-family property closer?  

My wife and I are planning to attend, see you there!

Thanks all for the helpful replies!