All Forum Posts by: Brian Burke

If you don't have the resources to buy both, yes. If this is your first flip, don't attempt to do two at once. Complete one before trying a second one. Plus, by wholesaling one of them, you will get feedback during that process that will give you some insight on how other investors underwrite their deals. That can be a valuable learning tool.

I've bought a few, and Brian Wall is right. It takes patience. Almost every one that I bought I was not the highest bidder, but got it after the highest bidder backed out.

Sometimes you are the high bidder, but don't meet their reserve price, so the auction ends with no sale. Then they later re-auction it and the cycle repeats. Some of these we've bid on for months before the reserve price gets low enough for our high bid to stick. Crazy.

Brian,

In my experience, each investor is different. You need to size them up quickly to find out what interests them, and give them that, and not too much more.

Some people are really interested in numbers. They will want to see spreadsheets, projections, past performance, and the sources and uses of funds. They don't care about you, it's all about the deal.

Some people are visual, they want to see before and after pictures of previous flips, pictures of the property you are seeking funding for, and perhaps a page showing a bunch of pictures of the exterior of a bunch of different flips so they can get a feel for the type of property you typically flip, or the variety of your experience in different property types.

Some people are less about the numbers and pictures, and more interested in YOU as an operator. Your core values, your approach, your history (real estate related, or not), your opinions about the market, etc.

The one thing they all want to know is how they will get their money back, and when. The one thing they all don't want is to be "sold", pressured, receive unrealistic or overenthusiastic projections, lied to, or bored to death with PowerPoint presentations and flashy graphics.

Some people will want to spend a lot of time with you, asking a lot of questions, etc. Others will have little time for you and will want you to respect their time and get to the point.

In your first conversation (probably by a phone call expressing interest) size them up. Bring along exhibits that appeal to all of the above personality types so that you are prepared to give them whatever will help them make a decision. And most importantly, just be yourself. Good luck!

I prefer 50 units and up, and over 75 is even better. The reason, for me, is that the quality of the third party management companies operating in this space is superior to the smaller firms, and when you get over 75-100 units you can afford to hire better quality on-site employees. Those two things will make your life easier because they can resolve minor issues on their own.

I also have complexes smaller than 20 units, and managing them takes more of my time than the larger properties.

Don't fall for the "one roof" example...most garden style complexes are comprised of many buildings with a few units each. Replacing the roof can cost hundreds of thousands. The scale of larger properties magnifies the income, but also the expenses, and most "surprises" are very expensive. I have to replace a boiler at one of my properties soon. It will cost somewhere between $20K and $40K. Ouch.

They have very deep pockets, and if you you are looking for them to fund your business and don't mind working for free, they can keep you going until you burn out. I had a HF offer me $25 million to start, and would go up to around $200 million for buying houses to hold. I turned it down. Not because I wasn't interested, in fact I had spent a LOT of time trying to secure such a deal, including meeting with over a dozen of these groups throughout the country. I passed because the terms just didn't cut it. I've seen term sheets from some other groups (to other operators that actually DID strike a deal) and they weren't too bad...so I guess it really depends on the fund.

Are they discussing funding you, or just buying houses from you if you find a good deal or have a house to sell? I've sold about a dozen of my flips in the last couple of months to two different HFs. They paid full market value (or more), they paid cash and closed in two weeks, so if you own some houses and you want to sell them, they'll be a good buyer for you.

Now, if you are looking to do very large multifamily deals, that's a different story, but I'm not thinking that is the direction you are suggesting.

Whoops...forgot one. City-data.com.

Search the web for the economic development committee/council/organization in the area you are looking at. They will probably have reports on their website that have compiled the stats you are looking for. If they don't, try the local chamber of commerce. There are sources such as Moody's Analytics but I think that's a paid service. The US Census Bureau also has some of what you are looking for, but I haven't found it to be all that user friendly. Another way, which is kind of short-cutting, is to search loopnet.com for Multifamily property for sale in the area, click on one, then click on "demographics" and you'll get some data that might be close enough.

Brandon Foken, about half of my volume is from the trustee's sale, and about half is from MLS. That has been shifting, I used to buy 100% auction, then 75%, now 50%, and I expect MLS might even climb further as auction volume reduces.

I don't have the luxury of direct mail/bandit signs/ etc. It takes too long to produce those leads, so I wouldn't be able to get the volume. I'm sure that method works for a lot of people, especially investors that just do a few deals at a time, but it just doesn't fit into my model. At some point, that might have to change too.

I don't have any rule of thumb for this. Instead, I call a couple of large property management firms in the area that specialize in single family rentals, and ask them about their vacancy rate and their sense of market velocity from a demand standpoint.

I would consider a 3 month supply of rentals to be a glut of inventory. If I don't get my houses rented in a month, I get worried. Most of the time they rent in a couple of weeks or less.

I see little relationship between SF and MF vacancy rates. That doesn't mean that an area with 20% MF vacancy would see 2% SF vacancy, but they are not usually the same number.

The trouble is, it isn't easy finding SF vacancy rates, and there isn't a treasure trove of data on SF rental inventory and rental velocity (unlike MLS data for sales), so estimating the supply in months of availability would be nearly impossible with any degree of accuracy.