All Forum Posts by: Bruce Petersen

@Aurelien Bonin

I am a mastermind member and also going to the event at the end of this month.

I have never been to one of his events but have attended a previous mastermind and it has a lot of value for new investors.

Yep, looking forward to being at the Bigger Pockets and Wheelbarrow Profits in October myself!

Hope to meet a bunch of people from here fact-to-face.

When presenting returns to investors it's on a free cash flow basis that they get paid their distributions so I don't see how you could present an incomplete picture?  

Free cash flow is after EVERYTHING is taken out including debt service, RR, Capex and of course asset management fee.

@Corey Griffo, 

"I heard it once said in a BP podcast, in the beginning go as big as you can comfortably."

Brilliant quote ;-)

@Jacob Miller, I also would re-fi until you have enough equity to cash out and go multi family (5 units and above). 

To each their own but please don't by that car unless you are taking your skateboard to work now and it's a necessity purchase :-) .  

Do as @Greg Dickerson said instead, buy assets that will eventually pay for the car with the FCF they're generating!

Freedom to go wherever I want for as long as I want with whomever I want any time I want.

To know that any time I step away all is still good and running smoothly without me.

Freedom to take a damn nap anytime I want!!

It's not money it's what the money allows me to do and give and who and how many I can help (money is only a tool to be used, nothing more)
 

Also, as many have also said, the freedom of choice.

@Calvin Smith

The first thing I ever did in real estate was to syndicate a 48 unit deal in Austin (back when prices were in the low 30's per door ;-).  This is not the best or easiest way for most to get started, however.

I firmly believe that the quicker you can get to multi-family (not multi unit which is what 2, 3, and 4 plexes are) the better but you have to do it safely.  Don't be reckless and take on too much risk as it could ruin you before you really get started.

For most it's best to start with single family or multi unit and work up to true multi family.  The biggest hurdle to starting in multi family besides the obvious education needed is the resources needed for a much larger project and the need for more capital than many have.

Also, to start in multi family I can't strongly enough recommend you find someone local with a successful track record that is willing to help out or at least give you guidance on this.

@Vincent Provenzano

You would probably need closer to 30% and 10-30% post closing liquidity.  For a 3.5mm property you would be looking at $1,050,000 down + operating capital and closing costs.  Also if you don't or can't roll the rehab into the loan you have to add $$ to fund your rehab as well.  Total in for this scenario would be roughly 1.2-1.3mm if the rehab budget is light.

You now have to have the 10-30% post close liquidity which could be as much as 735k in this example.

As you can see there is a lot to this and not just the down payment which I believe you are under estimating unless you do some non-traditional things as some have suggested.

@Danny Randazzo is right, you can do it just have to know the realistic probability of what's truly needed and involved.

Good luck with this.

@Sergio Ramirez

As @Greg Dickerson said, it's about NOI. You need to know the operating income and operating expenses (subtract expenses from income) to get NOI.

Next you need to decide what return YOU need on your money if you were to buy it all cash with no loan. If the required return is 6% then you take your NOI and divide by your required return of 6%, also referred to as you CAP rate. This gives you the value of the property to you.

Sellers will often times try to tell you how their NOI is way too low because of a number of factors and that once you take over you be able to drive the profitability (NOI) up which "of course" will support his much higher expectation on sales price.

Be careful with this as it's almost never the case. I would offer on current operations and not assume you can make the improvements he is suggesting especially on a first deal.

All of this being said, it wouldn't surprise me at all if he has no real financials on the property. If that's the case well now you have a totally new new issue to work through, how to build a budget of expected income and expenses.

Good luck but please be careful and try to find an experienced and successful actual human being as a guide or mentor to walk you through this. 

Youtube is great for how to change you spark plugs but usually isn't enough for buying an apartment with no experience. 

I own a management company in both Austin and Nashville.

For us there is a minimum monthly of $1500 (has to be worth our time and the smaller the more difficult it is to manage) but we don't tack on a bunch of extra fees, it's just the flat fee but the properties always pay all of their own expenses including marketing and total payroll.

It's tough to make this work on smaller properties, 30-40 units and below.  Some management companies may have lower minimums but as you mentioned you need to be very careful on the extra fees.  Have a written management agreement that clearly spells out all of the costs and fees and what they will do for those fees and how they plan to manage you property.

My experience as an owner operator is that it usually take 70 or 80 units and above to comfortably afford FT staff.