All Forum Posts by: Chase McArthur

@John Stone

My pleasure. That site Revestor that you referred to looked promising but has seemed to fizzle out. If I had to venture a guess, I would say that its dependence on accurate RE data created its biggest hurdle.

As an analyst, I can tell you that RE data is a very VERY precious commodity, there is a monopoly on it and Costar is the king.

@John Stone

As it stands the short answer is no, the type of platform that you are searching for does not exist. Truth be told, if it did, and functioned with any real efficiency, it would be outlandishly expensive.

Argus is going to be your most comprehensive analysis tool. RealData also offers a fairly decent comp to Argus.

As for real time market data, its going to be a shot in the dark, and will all depend on exactly what type of data you are searching for.

Investment firms literally have an entire department of analysts doing exactly what you are trying to achieve... I used to be one.

Real estate data is a highly conveted, and at times, proprietary asset that comes with a very high price to access it. Consider Costar which can cost literally tens of thousands a month to access.

I'm sorry my friend, but its going to take leg work to find what your looking for.

Otherwise, Ill be happy to help you the best I can.

@Eric Wilson

Yea, I think you are making a wise decision to pass. If at any point while looking at a deal there is a "but" statement made, move on. For example, as you said, "its in a bad part of town BUT its a good price". Thats you becoming emotional about the deal, you are trying to convince yourself that somehow you will be able to make it work.

If you ever find yourself somehow bending the true reality of the situation you should take a step back and reevaluate.

@Adam Rudolph

The market conditions dont dictate your success, your ability to properly mitigate risk does. As previously stated, you can make money in absolutely any market condition if you've positioned yourself properly. 2008 taught a 1 dimensional lesson in a 4 dimensional world. All of those that lost their asses had positioned themselves poorly because of bias and poor leveraging. Try to readjust your perception of how the real estate market works. It doesnt work like the stock market, it really isn't about "getting in at the right time".

Market conditions dictate 2 things, how fast can I get out of an asset and how much can I realize off of its liquidation. Ultimately there are only 2 ways to get burned, over paying and over leverage. And the main thing that creates those problems is by getting emotional over a deal.

This game is hella fun and can make you very wealthy but it can also make you its b*tch if you're careless. Ignore the hype, check your emotions at the gate and invest smart and you'll have it in the bag.

@Max McGuirk

A single property management company would be able to accommodate. It would be treated as a portfolio. Also,considering you wouldnt be purchasing the properties all at once they would be added to the management structure over a period of time. By doing this you would more than likely be able to negotiate management rates, lowering your costs.

Secondly, the benefit of owning multiple MF units as opposed to one large one would enable you to compartmentalize your assets insulating them from each other. This will allow you to mitigate risk.

This is essentially the same strategy used by institutions just on a smaller scale. They diversify their portfolio by acquiring assets over a broad spectrum of property classes and markets enabling solid returns in any economic cycle.

For example, right now everyone is hyperfocused on MF properties, especially smaller investors. The bigger players have started to turn their sights on alternative asset classes in a move to further mitigate risk as they begin to prepare for a market correction. These assets include, student housing, senior housing, work force housing and manufactured home communities. Theres a wave of new inventory thats coming so they are shifting capital.

@Gary Bahl

One caveat that most investors need to understand is that when you invest in an opportunity fund, you have to also invest the equivalant of your initial investment into capital improvement of the property in order to be eligible for the tax benefits.

For example:

Say you 1031 out of a property and net $500k. You find another property in an Ozone and create a self designated Ofund ( which is simply an LLC created for the new property) with which to purchase the property.

You then invest the $500k into the new LLC and purchase the property.

You must then inject another $500k for capital improvements.

By doing this you will defer the taxes on the initial investment. If you hold the property for 10 years you will eliminate any capital gains on the $500K. Deferment is calculated on a sliding scale of 5, 7 and 10 years.

The biggest benefit of this is that any appreciation of the asset during the 10 year holding period minus your initial investment is tax exempt after disposition.

Another benefit is accelerated depreciation of the asset through a cost segregation over the holding period, further reducing tax costs and boosting cash flow.

There are certain requirements that have to be met for all of this so seek the help of a tax professional that specializes in CRE.

@Nick Brown

Disregard his numbers. I assume that CRE isn't this brokers full time gig. If so, he should reconsider his specialty.

Truthfully, given the 37.5% vacancy rate, the property's cap would be my last concern.

The property is grossly over priced for starters. If my calcs are right, rents are currently around $300 and market is around $537. If that's right, then why are vacancies at 37.5% when the GPR is over 44% below market?

The asking should be set based off of comps and T12 data, not proforma. Let's safely assume a 12% cap, at 62.5% occupancy with rents at $400 your looking at an asking of $425k. I highly doubt this property is in any position to set the market, so he is way overly optimistic with that kind of asking.

PM the address I'll pull some Research for you.

What part of Ohio is it in?

@Max McGuirk

First decide how much capital you have to play with, then go from there.

As for the size, there's only 2 factors that are really at play, how much it will need to be managed and how much cash flow it will produce. These 2 factors are also interrelated, the higher the cash flow the more management will be required. The more units you have will also determine how much maintenance will be required.

Your biggest deciding factor should be how much of a return you require. More units doesn't necessarily equate to higher returns.

For example:

A 10 unit, $750k property that has $120k CF with $20k in expenses gives you a 13% return.

Where a 100 unit, $7M property that has $1M CF with $300k in expenses gives you a 10% return.

In a perfect world those numbers are amazing, however, the larger and older the property, the larger the CAPEX, which can completely destroy your returns. Not to mention, larger debt servicing, higher taxes, higher property management fees etc. All these factors eventually come into play, but ultimately it's up to you to decide how much of a headache you want at the end of the day, one that requires a few tylenol or one that requires morphine.

Personally, I'd rather own several smaller properties than one large one. In this game its all about diversifying and its hard to diversify with one property.

@Chase Louderback I was actually looking into Reonomy myself. If you talk to them they can get you on a monthly plan. The Professional license is $400 a month and you get access to 1000 owner information "reveals". The next tier down is $200 a month but you only get 250 owner info reveals. 

I decided against it only because I have access to all those other systems and I would really only be paying for convenience. Besides its hit or miss as to whether the data you receive is up to date. 

However, the one aspect that did strike me as unique with them is that they approach data collection from an algorithmic direction versus a call and survey approach like Costar. They also supposedly have contracts with data companies that provides them with certain data sets that aren't readily available on public networks. That being said for someone with a limited budget (if you consider $400 a month affordable) it is not a bad platform for data mining. Relative to subscriptions to Costar, Landvision, LexisNexis and Yardimatrix which cost in the tens of thousands a month its VERY  affordable. 

Bottom line, subscribe to the lowest tier, see if it works for you, if so upgrade. But beware, you are locked into a years contract. And if you look at it from an ROI standpoint if you close one deal from it, its paid for itself.

@Amad Osman It's kind of difficult to find books on the subject that isn't written for seasoned investors. They are typically pretty heavy in the jargon and presuppose a lot of advanced CRE finance knowledge. If you google "CRE Real Estate Debt Investing" you can find a trove of information.

Here's a decent link from a trade organization called CRE Finance Council that does a pretty good job in breaking down the subordinate debt markets and investment opportunities.

https://www.crefc.org/crefcdocs/CREFCPrimerInvesti...

Its a good starting point for you.

@Erik K. I have an atypical "how I got in this business" story. My family has been involved in RE going back to my grandfather, so I grew up in it. But I didn't fully embrace it until after I got out of the military. I knew eventually I would get into it, it was only a matter of when. After college I went into deal underwriting, running the numbers for a MFO that my family was a part of. I got involved in investing by being on the front end of deals that went through the office (just had to be careful not to trigger any COI, for example I couldn't underwrite any deal I was a part of). That was my day job then.

 I have since moved on to go it alone. I was always intrigued by the high speed game of brokering the mulit-million dollar deals, there was always something sexy about it. So that's what I do now. Paychecks are sporadic but I don't really do it for the paycheck, I love the hunt. So as far as my risk is concerned, it's minimal. I made smart financial decisions (through trial and error of course) so I'm pretty solid as far as passive income in between paychecks. I consider myself a full time investor as well, in both time and money. I play the markets, still have some equity in a few properties and of course my "full time job" of brokering. I have what I call the trifecta, solid assets, solid passive income from those assets, and a way to make more. Assets are nice, passive income is nice, but if you don't have a way to increase both you're rowing your boat in circles.