All Forum Posts by: Benjamin Aaker

Hello Ty and welcome to BP!

First thing I'd recommend is to get a handle on your plans over the next year or two. You said you will be moving and it would be good to know how far. If you are staying in driving distance it will be easier to manage. If you are set on purchasing be sure to include in your analysis cost of management. You should find a few property managers in your town and discuss their fees so you can use this to underwrite your deal.

Sounds like you should take some time to decide whether you want to flip a house or get into multifamily. I'm a multifamily guy but they can be a big thing to get into with your first deal. If you are flipping your first house, you should budget 9-12 months to get it done as it always takes longer (and costs more) than you think when starting out. There is a lot to learn.

Decide how much you will be willing to put down and that will help you to decide a property size. To echo Andrew you should interview a few bankers and discuss. You will find that having a good banker is an asset. There are ways to do it with no money down but the risk is higher in my opinion.

Find a great agent to represent you, such as those who take the time to post on BP. Not all agents are the same; most are looking to sell you a house at retail prices. You want one who deals with investors. Take your time to find the best one for you. Good luck and happy investing. We are here to help.

@Jay Hinrichs - Excellent point: Those investors who have planned ahead and kept reserve accounts have little to fear over the short term. I'm certainly not predicting receiving all my rents in May and June but will be able to cover for low economic occupancy. Those who haven't planned ahead well will be looking to government stimuli for help. Those who haven't planned at all will be looking to sell. The rest of us should be looking to buy.

By the way, greetings from Sioux Falls, #3 outbreak site in the nation right now. Those who keep their eye on the long game will do fine. Stay healthy and stay the course!

My main concern is for commercial properties, especially those doing retail. I have a few apartment buildings and April has been status quo for rents. May might be different but hopefully there is enough government stimulus for tenants by then. There is not much for retail and service businesses yet. Further, the government is essentially telling people to not go out and shop, which continues harm to these businesses (while helping the public health). If you are in the market for a commercial property you should take a hard look at how long you think people will be staying home. If we are able to 'flatten the curve' that will be great for hospitals and health, but to flatten it means to lengthen it, too. People will be staying in longer and businesses will continue to suffer.

On the multifamily side, people will still need places to live. I think that the government eye will be on helping the individual tenants for the foreseeable future. I think those able to weather a few months of decreased rents will be in a position to buy multifamily at a discount. In fact, I put in an LOI on a 16 unit today.

There are a fair amount of investors who are willing to put in a larger portion of their cash into the deal. As an example, try doing the calculator again, but bring 75% cash (the bank loan is 25%) and you will see that your cash on cash goes positive. It's positive because your monthly debt service goes way down. It is small because you have that large denominator (the cash you had to put in). The lower the cash you have to invest, the higher the return is (as long as you get a return).

The debt service eats up a very large chunk of your monthly gross revenue. Not always a bad thing if you are doing the long play and looking to take a loss on paper for depreciation. Also not a bad thing if you don't have a lot of money to bring into the deal. Back to your question: investors with a large amount of capitol will look at the deal differently from you and are able to pay more. At this phase of the market everybody with money but not always sense is looking for a place to invest. Real Estate looks great right now. Prices go up and the great deals are harder to find. Keep looking, though and you will find them.

I recommend Derek Simonson at First National Bank of Sioux Falls. Send me a PM if you would like the contact information.

Congratulations on getting far enough to evaluate a deal and having the guts to post it! Not every deal is going to be great and that is what BP is here for.

Notice how your Cash on Cash return is negative up until year 5? That means you will be losing money for the first five years. It's also unlikely that you will be able to get a 30 year term on a commercial property. These are generally 20 years and you will need to refinance somewhere in the middle like at 5 years. Your debt service will be higher and this will push down your returns further. If you have the money to 'subsidize' it and you are in it for the long haul, then you will likely have an income producing property. The problem is that it will stunt your real estate growth because you won't have the money to invest in other properties. 

Hi Logan, welcome to BP. Best of luck with your future investing!

Thanks for all your comments. They are very helpful. I certainly would be very skeptical if I got a cold-call asking to invest. Certainly building relationships is the way to do it. 

Hi @Taylor L. and thanks for the reply. I'm looking to contact companies that market their products to those whom I think would be accredited investors. These companies are not in the real estate sphere and I would essentially be 'cold-calling' them to inquire.

I'm planning on 503(c) due to it's allowing marketing so long as the syndicator takes steps to verify that the investor is accredited.

Agreed, networking is the usual method and I have a database of contacts obtained this way. I'm looking for ways to expand. Thanks for your comments.

Hey, BP team! I've done one syndication deal and am working on the next one. I've been in contact with a few companies that are in different spheres but market to the type of person who would make a good investor for me. I plan to market under Reg D 506(c) and will vet my accredited investors. I think I have my ducks in a row with the SEC.

I'm looking at soliciting for contacts from these companies and hope to get names/addresses, secondarily email addresses. What do you recommend offering financially per name/address and per email? Is there a 'going rate' so to speak? Or would you recommend a reimbursement that is much higher for production of a lead that ends up investing?

Thanks for your help.