All Forum Posts by: Bruce Petersen

I never go by the broker's projections, NEVER.

I walked a 200 unit with an agent recently and asked him about his firms tax assumptions and he told me, Bruce, you know what you are doing so don't look at our numbers ;-) (The wink was done by him).  I like the agent a lot and have done business with him in the past but WOW.  I was over his number by more than $2,000,000.

Every lender I use will gross valuation up to at least 80% of my purchase price, I use 90%.  Couple properties back I got hit with a 50% increase to a number above my purchase price, it was exactly my appraisal number.  I contested and got it lowered but it was still a 40% increase.

Caveat emptor, be sure you run your own numbers, always.

I agree with the sentiment on this thread in response to your post.

You can't be afraid to move or you will never move, the time will NEVER be right for the cynic or unreasonably cautious.  I know many people who are waiting for the perfect time and perfect deal, the problem is that some of them have been waiting for 4-5 years!!!  You just have to be smart on your purchases.

I'm solely MF (5 units +) and every deal I underwrite now I stress test by seeing what a drop in rental rates does to my return and always run a break-even occupancy calc.  Don't over leverage yourself and buy with a margin of safety and you should be able to whether what ever storm may or may not come.  People that lost their shirts in the great recession were highly leveraged and buying with little to no free cash flow, if the market corrects you lose.

Being new-ish to BP I haven't heard a ton of them but for me it's definitely Grant Cardone on #108.

@Account Closed

I live in Brentwood area, if you are considering MF let me know, I LOVE talking RE and wouldn't mind meeting and sharing info.

My latest purchase (17.65mm) was an assumption.

When doing an assumption most Fannie lenders will allow up to two supplemental loans in addition to the original but won't typically exceed 75% LTV for the combined loans. The supplemental loan will have a different interest rate but will be coterminous with the first (same maturity date), and will have no replacement reserve escrow because the original loan is already making those contributions. Caveat, I've seen a friend apply for a supplemental on a project he held for 2 years and had added tremendous value and had taken no supplemental and the lender said NO so he ended up selling instead.  There is nothing in loan docs that will say you have the right to X number of supplementals so the lender can indeed decide they don't want to add more debt to the project.

If there is any IO period remaining you will get that as well but only for the original loan, the supplemental will not any rehab $$ or IO. If the seller has already used one of the supplementals then once you close, if you take out another, you will have no ability to take another. A cash-out refi is usually only doable with about 6 months remaining on the loans so that can restrict your exit strategy options because if you now want to sell the potential buyer can not get additional loan dollars and if they put fresh debt on it there will be a very large defeasance (prepayment) payment you will have to come up with.

Final thing, don't just assume you can get the assumption approved by sellers lender and don't go on the word of anyone except the actual DUS lender.  The lender will look at the buying entity and weigh them against the current owner.  If you don't have the same balance sheet or experience behind you then you are deemed to be riskier no matter how many times you can cover the loan balance in networth.  If you pass your feasibility cutoff and aren't protected with a good finance contingency your earnest money is at risk which can be as much as 1% of the purchase price.

Little more to it than fresh debt but it can be worth it if you get a good price and the interest rate works.

Just know what you are getting yourself into but it can be a good thing.

No pass regardless of size.  For my last purchase, ~18mm, I had to show 13mm+ in networth and over 1.35mm in post closing liquidity.

The larger you get the lenders don't suddenly throw risk mitigation for themselves out the window.

These requirements are met by the Key Principals or Signers collectively so you would need to find a "signer" or two to clear the hurdle.  Even if they are only providing balance sheet and nothing else you will likely still need to compensate them for there signature.  Their compensation is a negotiation.  How well do they know and trust you and your track record and how high is the perceived risk in the transaction?  I will usually ask 2-3% equity for just balance sheet and closer to 5% if you also need my experience to help you qualify.

Everyone's personal preference is unique but as @Thomas S. mentioned, I would never pay off a mortgage.  Your return on equity drops significantly.  If you take that equity out or use the savings realized by not paying extra on the notes you could continue to expand your "Empire".  

The key is to use leverage wisely, don't over leverage yourself but also don't tie up unneeded equity in a property, turn that equity into other rental properties.  This is how you eventually get into apartment complexes and life changes for the better.

Didn't say you had been difficult, I was just giving some of the things that could cause an investor problems.

Sounds like you are doing the right things just have to persevere.

Good luck by friend and keep plugging, something will fall. 

Don't know what you personally are or are not doing but:

- do have a history of low balling?

- have you been difficult to work with?

- have you been under contract and backed out for unusaul reason or get cold feet and bail?

These things matter, if the agent or broker thinks they are wasting their time or that you aren't a serious buyer they may begin to tune you out.  Your reputation matters a lot in this industry.  

Forgot to mention the main point of your question, they also have an incredibly large vendor base that is used to working with investors.