All Forum Posts by: Charles Soper

So there’s something to be said for having equity for cushion going into the next few years, but you need to balance that with your growth goals, which only you can decide.

As for a LOC, I like them because you only pay on what you've used and the interest rate is usually reasonable as comepared to a cash out refi leaving you with less equity and the potential to have trouble doing a Refi in the next few years when your balloon is due.

so is this considered a commercial property since you have more than 5 “units” on one parcel?  If so, you might consider a line of credit once stabilized so you can hang on to these AND get your next one started.

Why do you need to be free and clear in 5?  Why not take a 30 year note and let your future tenants pay down the note?

Here ya go! https://www.crexi.com/properties/55368/watkins-man...

A small group of local investors who are developing a mastermind/accountability group.  Coffee, networking, and discussions about whatever stage of real estate you might be at.  We can be found at meetup here.

@Jack Zhuang, it seems like you are trying to justify how a “small fry” can participate in the larger deals as opposed to being “stuck” with smaller multifamily.  I struggle with this too but what I came to realize after talking with some other MF guys is it’s probably more difficult  to manage multiple smaller properties than it is one bigger assuming the number of units is the same, the economies of scale.

As for the financial aspect, unless you have GC money burning a hole in your pocket looking for a place to hide from uncle same working with a team and getting involved in syndications May be the way to go.  Heck, GC preaches syndications and MF all day long!

That said, moving from SFH to big MF is scary, and that is where smaller MF units can come in. Maybe not 4-pieces, but more like 12,16,20 unit properties.

If you like I have a contact that lives in the Bay Area who does syndications, I can reach out and put you two in touch, he’s done small and is now doing large, think he’s closing on a 608 unit in the next 30 days.

You’re best route if you really want to get into BIG multifamily quickly may be from the LP side of a syndication, or as somebody who can add value to the GP side AND still toss some passive funds into the deal.

Long winded, hope that helps 

Economies of scale come in to play pretty quick after you get into commercial properties.  4 4-plexes = 4 roofs, four sewer systems, 4 water/garbage bills, etc. as with larger multifamily you’ll save some of those hassles and costs.  You should still be conservative on your underwriting and use about 50% for your expense ratio until you have systems in place to reduce that.

Since you are considering out of state you’ll need to take PM costs into account as well, 4 4-plexes would likely be 10% management fee per versus maybe 8 percent of a larger single complex.

Some say LoopNet is where deals go to die, I believe you can still find good deals but you either need to be quick or lucky.  With the market as hot as it is most good to great multifamily deals never see the open market, they are pocket listings and only the “proven operators” usually see those deals because of their relationships with the broker.  That can be hard to overcome but if you search BP or find a book or two about doing syndications you can find great advice on creating those relationships, Id suggest Joefairless.com as a starting place.

@Account Closed, couple of masters at this in the REI world, and lucky for you they've both written books!

Larry Harbolt

http://www.larryharbolt.com/

And

Pete Fortunato

https://www.peterfortunato.com/

I've met and listened to both of these sages at my local REIA and what a treasure trove of experience, they've forgotten more deals they've done than most of us will ever accomplish.

Not the expert on seller financing but if they carried the second its all about how you negotiate terms.  Ideally, you are walking away with the down payment financed for as little out of pocket as possible.  That might be interest only for a period, or possibly P&I but at a really low interest rate, or even no payments for x months and interest only after until you can refi.  You are only limited by your creativeness to solve the seller’s problem.

That would explain some of it for sure!  I’ve always calculated rough expenses at 50% regardless of property size/type, makes for conservative underwriting, anything better is just gravy and happy investors.

That said, I think 35% is low, especially for somebody who hasn’t done property management before.  Do you recall where you saw/heard 35%?  For an experienced operator with systems in place I could see something approaching 35%.