All Forum Posts by: Will Barnard

Utilizing a buy and hold strategy is a great way to get started and in this market, should be the most used. Real estate has its cycles and they always come back. Many investors and newbies, are sitting on the fence saying that they missed the last market "run-up" and there will never again be a cycle so good. That is incorrect, as cycle repeat. In fact, the market we are in now may be even better than the run up market from 2002-2006, it will only require a differnt strategy. From 02-06, anything you bought in CA turned into large gains inside of 6 months. Flipping was easy and anyone could have done it. Today's market requires a diferent strategy (Buy & Hold). Buy low and now while RE is on sale and very few are buying, and sell later when everyone else is buying. That is how you make $ in this market.

If the market in your local area is not currently condusive to this strategy, look outside your area or even your state. No sense buying in a poor market when there are good markets abroad, regardless of what you here in the news.

Purchasing multi-family units are excellent investment choices (in my opinion , the best right now), particularly new constuction as they come with builder warranties (little or no maintenance costs for 1-2 years), they will have greater future appreciation (compared with older units), and they will be easier to sell when the market turns to an upswing.

As others have mentioned, due your homework (due diligence) and most importantly, run the numbers to make sure the deal makes sense. Shoot for $100 per door as a minimum.

Banks do have short sale opportunities for these properties as well as apartment buildings. Convincing them that they should short sale with you coming to the table with 100% financing might be a large hurdle to overcome unless you are creative.
I love TX for investing and would like to know about these properties you are looking at.
I am a full-time professional RE investor and perhaps we could set up a JV, a birdog fee, an assignment fee, or other arrangement and do these together.
Contact me so we may disuss this in detail.

All great advice for the question. It is very true that throughout the journey of locating investors, you will run into many liars/phonies who claim to have experience, but really do not. This is not to say that you should not include rookies and newbies in your investor database, as you become the professional who structures RE deals for them. A lot of investors simply do not have the time or the knowledge to find and structure good deals and would be interested in working with a competant RE pro who can deliver great deals to their doorstep. :D

Good luck with your RE venture and do not forget to contact me when you have a great deal to wholesale or pass on to an investor.

For the record, any property of 4 units or less is residential. Any complex with 5 units or more is commercial. Therefore, a duplex, tri-plex, & quadraplex are all classified as residential properties and all receive residential loans. The people you have talked with do not know squat. I suggest not doing business with them.

Food for thought: The owner carry at 0% interest is great. Other than that, you are overpaying for the property. Commercial property operating expenses average between 40%-50% of AGI (agusted gross income) therefore the listed expenses are incomplete (they show only 31%) and thus the NOI is incorrect (too high) Furthermore, the Cap rate for that type of building in that area seems a bit expensive to me (I could be wrong about that). Of course, the real question is, what amount of return do YOU want? I would be lookiing for a 9% cap or better on the true figures. Do not forget to add in accounting expenses, potential state taxes, corporate expenses, and misc. expenses. Also, I always want at least one upside potential. Where is it here? It is 100% occupied so no potential there! Can you increase the rents, change the usage, or add another income stream from the property?
Sorry to burst your bubble, but for every 100 deals that come across your plate, there is only 1 good one.
Best of luck to you.

I am interested in attending the meetings in Pasadena. Sounds like a great place to network.
Keep me informed / send an email

I have visited their website a few times to investigate what they offer as well as look for information. I have not personally done business with them, but they seem to be on the right path. I did notice that a large majority of the investments are pre-owned and not new. That worries me as an investor during these times. Cash flow is definately the way to gothese days and repairs/maintenance would cut into that. I prefer new construction or only 1-3 years new. This way, you get a builders warranty and on the re-sold new ones, a 1-2 year warranty is also commonly negotiated.
I started out in San Antonio several years ago (when starting in TX) and am now working a majority of my deals in the Dallas/Fort Worth Area (Fort Worth in prticular). Multi-family units are the way to go as the rental market is very strong here as is the job growth.
Realtors are an essential part of your team, but be very cautious and remember how they get paid! A large majority of them are useless, speaking from the investor point of view, as they have little or no knowledge/experience. This is not to say that all Realtors are bad, simply to shed light on the situation.
Good luck in your investment career and make sure you get educated. Read books, attend club meetings, speak with mentors, and work with professionals who have a proven track record!

Great post and questions! This is a topic of great concern for newbie investors. Although Josh makes a valid point about investing in your own backyard, it is not always feasible. The key is knowing how to build a quality team or have an expert on your side who can provide this to you. I reside in CA and would not touch a residential property here. I find that the best areas to invest in for long term buy and hold strategies are undervalued markets, strong economy and job growth, diversification of jobs, and a very strong rental market (good rates with low vacancies.
These areas are not usually where we live so it is necessary to go out of town or out of state. Texas, the Dallas/Fortworth Metroplex in particular, has strong job growth, great rental demand, is the #1 most undervalued property in the US, and you can receive great positive cash flow with very little $ out of pocket. This is a great area & strategy to start as a beginner.

As far as some bad past experiences mentioned by Tim, I feel for you as you are not along, but never let that discourage you or ever say that all property managers are useless or incompetant. One of the greatest advantages to working with a prof. company such as mine is the buying & negotiating powers I hold. For instance, a property manager would risk losing All of the clients I send their way by screwing one of my investors. A beginner on hi/her own is more exposed to be taken advantage of because they lack the knowledge, experience, and the risk of loss to the manager.
Happy Investing to All!
Will Barnard

I disagree with the last post. Cap rates are 100% relevant in determining the value of a commercial property. Be it 10 units or 1000 units. As for an acceptable cap rate on low end properties, asking for an average is irrelevant. The determining factors consist of the particular area, the type of property, the condition, the ammenities, etc. just to name a few. In CA, good luck finding apartments at a cap rate above 6%.
In other states like NC, TX, OH, etc., it is quite common to be able to purchase small and large buildings in the 7-10 cap range.
The real question is what you in particular are willing to pay for your ROI (return on investment).
In addition, you need to factor in any and all upside potentials or potential downsides.
Although it is true that many (most) Realtors/Agents do not have the first clue about investments, cap rates, or contracts, there are a handful who invest themselves and can be very useful in locating and investigating potential purchases. Again, it is also true that many sellers do not provide true and accurate figures for OE, NOI, or rent rolls. Many do not even have a clue as to why they are supposed to. That being said, it is imperative that you understand the particular areas average operating costs including taxes, insurance, management, maintenance, utilities, etc.
For a quick financial rundown on a property, I take the gross rents, subtract 10% for vacancy, multiply that AGI by 60% (40% oper. xpense) which gives me an estimated NOI. Then I divide bthe NOI by the cap rate I am willing to offer/pay.