All Forum Posts by: Cliff Harrison

 It's a balloon and there is no guaranteed refinance, but generally they will use a prime '+'  for the refinance, and I think 1.5 is the 'plus' standard for them on the commercial refinance.  

I am getting 5.25% fixed for 5 years (then balloon) on 25 year am with a local portfolio lender up to 80% LTV. I have a total of 23 loans, 6 with this particular lender so far. They are also financing a package purchase of 20 duplexes for me at 4.5% due to a good track record with the individual SFR and duplexes.

Hi Laura - I'm active in Grandview and south KC areas with 27 units.  I've looked at some multis in Peculiar just haven't found one that quite worked.  Ray-Pec schools are a plus.  Good luck, welcome to Bigger Pockets.

Cliff

It's been awhile since I have posted here. A few months ago I decided to focus on multifamily to continue to my growth in buy-and-hold. I have acquired a good number of SFR and small multi to date, done several BRRR projects, and generally things have been going well.

Competition for deals has increased in my area.  I was not finding the types of returns I was able to find the past couple of years.  I decided to start shopping small apartment buildings and try a different niche.  I read everything I could find online (including BP contributors), bought a book, and generally tried to become an expert in something I had never done, before doing it.

I was shopping in the 8-12 unit range.  In my search, I became aware of a large apartment complex that was in my area that was up for sale.  I knew the property managers.  I discussed with them.  I had a current tenant in one of my duplex units that previously lived at the complex.  I discussed with him.  Someone was going to do well on this, but it was too big of a deal for me to take down, so I moved on.  But it kept popping up in my thoughts - there was a very strong 'value add' play to be made and I could not let it go.  I had learned enough from my multi-ownership research to be aware of various syndication and OPM models.  Why not?

What I ended up doing was creating a business plan and projections based on a partnership acquisition model, with me as manager and a passive investor pool.  It still looked very attractive overall and I thought the member returns would be attractive also for passive investors.  I had a couple meetings with the two portfolio lenders I work with, and they agreed to back me with a competitive loan if I was able to swing the deal (not together, they will be competing on terms to get the loan).

With my lender assurance and projections and story in hand, I approached people of means that I knew, mostly from my non-real estate professional career (information technology) plus a few connections I had made in RE. In the meantime, I was negotiating hard on the acquisition, with a contract contingency that I would have to secure the acquisition capital within 30 days of contract effective date or be able to walk away with my EMD. I am fortunate that some of my connections have faith in me and the timing was good enough for them, and I sold out my offering!! We will have adequate reserves going in on top of the acquisition costs, and I have a backup investor in case anyone gets 'Alligator Arms' when it's time to fund. So now seemingly out of nowhere I am under contract for a 84 unit complex and I can't wait to get started and reward the investors for having faith in me. (btw, that is a new kind of pressure I have never felt on my own deals). I also am contributing capital, mainly to demonstrate my skin in the game, but not very much in the scheme of things.

I'm not going into detail yet on the deal and the partnership structure, I'd like to get through closing. If we get through closing, and my analysis pans out, this came together very well, and I feel fortunate. I wish the same for you as well.  I learned a lot from the BP community regarding the concepts and strategies to do this, and I appreciate all the contributions everyone has made.

Thanks

Cliff

I have not purchased a TK, but I did review several TK offerings and attended a showing of a TK here in KC that was coming on the market. I decided instead to start with move-in-ready properties off MLS, which took more work on my part but I was able to consider more inventory in locations of my choosing, negotiate more on prices and capture some equity on the purchase, whereas I felt the TK was about 10% over market. I then moved on to BRRR from there. ALL of the TK proforma's I looked at, from a few different providers, did not have a CAPEX account at all, underestimated maintenance/repair, and did not account for items such as PM lease up fees, and would typically be aggressive with vacancy estimates. Even with a new rehab, you should budget for CAPEX. It's just that you hope you will not tap that account for a relatively long time and (may not) have to come out of outside reserves to pay for the items when they are eventually needed. If you don't have a long hold period, TK is not a good solution either because of the transaction loses and lack of equity that you need a long hold period to overcome. TK solves a set of problems for some people and provides a convenient way to invest, but it's sub-optimal if you are going to be somewhat engaged with your investments, in my opinion.

HI Brandon,

I have a family friend who is licensed and does HVAC for me on nights/weekends.  He is not particularly cheap but he's good and I can call him at odd hours.  Let me know if you want the contact info.

Cliff

Since you need to do your homework on Turn-Key, you may as well do your further homework and buy a move-in-ready retail property or even a cosmetic rehab property and save most of the Turn-Key markup and have freedom to shop for the best PM.  There are several ways to be misled in buying Turnkey.  The proforma expenses will be understated, and the rent will be top-of-the-market.  The price you pay for the home will be based on the top-of-market rent, whatever multiple the provider thinks they can get. It's hard enough to earn nice returns on SFRs being hand-on.  With TurnkKey, you are also the source of profit for the Turnk-Key business.  Most endorsements for Turn-Key are from Turn-Key providers.  It might make sense to put your money into real estate to eke out a small profit or sustain a small operating loss IF the property were likely to appreciate - but these midwest turn key houses will not appreciate.  It's much more likely you will have a $1600 repair bill on your first tenant turnover.

Very nice!  Great first deal, I hope it exceeds all of your projections!

 I have my first case with them in progress, it's a little early to assess them.  But they have a clear and competitive fee schedule and seem to know their business.

These folks do it (collections and services) as a specialty: