All Forum Posts by: Brian Metz

Hi Arturo,

Read Matt Faircloth's book Raising Private Capital. I recommend getting some experience first if you can. Like @Bill Plymouth said, try to team up with someone that does have some experience in your area to build street cred too. Well put Bill!

Best of luck!

Cheers,

Brian

Hi Sunny,

Like what @Chase Louderback did is correct, like he said, you need to know what your expenses will be and have a very diligent and detailed understanding of how the property will operate. I'd never trust anything from the seller, especially NOI. Do your homework and know what the other properties in the area are doing as well before jumping into anything and what cap rates have done over the last 10 years to help with your valuation.

Best of luck!

Cheers,

Brian

Hey Josh, I had one off-market deal I was working last August until the one and only @Shelby Osborne beat me to it :)

Hi Derek, I'd call around to some brokers and ask about cap rates if there's absolutely nothing for you to base off of in the area. From there I'd use that with the seller's asking price to see what they think their NOI is. And then cross check that against the rent roll or whatever your estimates for the rent is.

It might be some work, but digging into historical caps when the owner purchased might give you an idea what the markets done, or if the owner just made a really bad choice then paying $750k.

Best of luck - sounds quite exciting with some potential!

Cheers,

Brian

Hi and welcome to BP! I don't know what your market is like, but $12k for 10 units sounds absurdly low, so I'd be very diligent with inspections, planning, etc. My first purchase was 6 units which I put in cash and then worked to refinance, but most banks I talked to wanted a year of seasoning...there are different banks/bridge loans I could have investigated to change that, but what I'm getting at is make sure you have a solid plan for financing/re-financing in place so you don't hose yourself with a bank saying we'll only refi on LTC not LTV.

And like @EdwardLiu said, never believe the seller.

Cheers,

Brian

Yes CapEx and debt service below the line, PM costs and reserves above, like everyone has been saying! And don't trust any provided NOI - run your own numbers - it's a must. Joe Fairless' book on apartment syndication is excellent overall and talks to some of this as well.

Good luck on the 16 units!

Cheers,

Brian

Investment Info:

Large multi-family (5+ units) buy & hold investment.

Purchase price: $194,500
Cash invested: $58,750

This property consists of 6 units via 3 duplexes zoned commercially on a single lot, located in a lower-income area of Fayetteville.

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

There was a value-add opportunity. 2 of the 6 units were vacant while the previous owner was rehabbing them, and the other 4 had not been updated in some time, due to those tenants being in place for 7-10 years. Rents were below market by about 20%. I was able to initially come in with a cash offer, which helped facilitate, since it's a small commercial property and the 2 vacant units deemed it as distressed to many banks.

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

I found it on Realtor.com and used a traditional real estate agent.

How did you finance this deal?

Initially cash, and then I performed a cash-out refinance.

How did you add value to the deal?

Post-purchase the appraisal with current cap rates came back at $230,000. Raising rents to market value and renovating the units as those tenants move out has facilitated an NOI increase, further increasing the value to ~$250,000.

What was the outcome?

I still own it, and it is cash flowing nicely and I've created additional equity through forced appreciation.

Lessons learned? Challenges?

Being a small commercial property, financing was difficult so I elected to pursue the initial cash option. 2 of 6 units vacant labels the property as distressed to many banks, as I don't have the economy of scale working in my favor. Delayed financing is very different than a traditional residential delayed financing deal. I didn't wait the year of seasoning the large banks I was working with require, so they were only able to lend at the purchase price, not the appraisal.

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

I used a residential real estate agent when I should have been working with a commercial broker who understands the process better - don't do what I did!

Hi @Scott Morongell,

Personally, I'm still building my investor network so that is my biggest challenge, but I think at the macro level, the biggest challenge is finding deals with proper underwriting. There was a previous post that discussed pivoting when the time requires, with reference to a Gretzky quote, and I think that hits the point home!

Cheers,

Brian

@Kenny Kamdoum Hi Kenny, sorry for the delayed response, but yet that was my first purchase and I used savings to purchase it so I haven't raised any capital yet, but that's in the near future.

Cheers,

Brian

Hi Kenny,

I'm also new to the realm - I picked up my first 6 units about six months ago. I think you're right in the regard that if you find a great deal you could raise money to fund it, but where you raise that money is key. Without any prior projects or credibility I think it'd be difficult to convince seasoned investors to side with you; however, looking toward friends and family may prove beneficial earlier in the game.

Great question and I look forward to reading others' follow-ups!

Cheers,

Brian