All Forum Posts by: Cory Carlson

I would check out Cozy and Stessa and see if they meet your goals. I have clients who use both and they are pretty similar.

Investor friendly agents generally share some of these traits: Great analysis skills, software, and tools with a wide understanding of the market (others too, to add context), investment strategies (able to elaborate and quantify them), well connected and credibility. I agree above, getting with a firm that specializes in investors and has the tools. One of the quickest ways to gain credibility is to have a pipeline of good deals. 

Its hard for someone who works for a "run of the mill" residential brokerage to sell their investment aptitude. Just my opinion. 

I find syndication and/or partnership provides a higher return in OR. I know you mentioned interest in investing elsewhere but perhaps this illustration helps narrow down your goals and answers your questions. This is copy and pasted from an email i sent a prospective client last week, so if its slightly out of context, i apologize. I feel that it fits considering my client and I touched on a very similar question.

Lets start with the PROPERTY VALUATION & RETURN PROJECTIONS sheet that allows me to analyze three properties side-by-side with sub categories using current and pro-forma scenarios. Sheet 1 named, PVRP_RESIDENTIAL is outlining three single family home scenario’s varying from an all cash to moderate leverage position. Beyond the numbers, there is a strategy conversation to have here on the difference between several single family homes and the multifamily scenario. Example being, owning three houses that equal $1,000,000 in value, or owning one $1,000,000 multifamily. Simply put, capital/equity growth is more difficult in the single family scenario - that is, maneuvering the upside in a single family home does not fall into the “financial picture/income approach” but valuing the building based on what a buyer would pay ie. using comps. So strategically, the single family scenario is a game of comparables and more convoluted than the multifamily/apartment “income approach” valuation.
Lets dive into a few of the take-aways from our PVRP_RESIDENTIAL:

Residential 1:

• $350,000 single family home with no debt
• Market rents for properties like this are around $1800
• Operating expenses are relatively low, tenants pay utilities and i’ve a assume a owner/manager situation for all three scenarios
• No debt, means no principle pay down, higher cashflow in dollars, lower After-tax cashflow return due to taxes
• Projected year 1 returns would be as follows for this illustration:
  • Pre-tax Cashflow $13,070 (3.73%), Pre-tax + Pay Down $13,070 (3.74%), After-tax + Pay Down $12,749 (3.64%) and Total Return $22,551 (6.44%)

Residential 2:

• $350,000 single family home with low leverage (50% Loan-to-value)
• Leave market rent and operating expense variables the same to maintain a like-kind analysis
• You could theoretically buy two of these, so for illustration purposes multiply each return metric by 2
• Projected year 1 returns would be as follows:
  • Pre-tax Cashflow $3,640 (2.08%), Pre-tax + Pay Down $6,999 (4.00%), After-tax + Pay Down $7,224 (4.13%) and Total Return $17,026 (9.73%)

Residential 3:

• $350,000 single family home with moderate leverage (70% Loan-to-value)
• Again rent and expenses are fixed
• You could theoretically buy 3 of these with your available capital
• Projected year 1 returns would be as follows:
  • Pre-tax cashflow -$132 (-0.13%), Pre-tax Cashflow + Pay Down $4,570 (4.35%), After-tax + Pay Down $5,014 (4.77%) and Total Return $14,816 (14.11%)

The take away here are the fundamentals of leverage.

Sheet 2, named PVRP_MULTIFAMILY will outline some current on-market opportunities. As expected, inventory is low but I picked the ones with potential to utilize upside.
Sunridge Townhomes - 9 Unit Multifamily Syndication/Partnership in SE Portland *Also see QVIA_SUNRIDGE attached for two investor breakdown

• $1,425,000 purchase price with 65% Loan-to-Value (Approx. ~$256,000 cash to close for both investors)
• Current rents are stabilized at $1,247/unit per month with utility bill-backs in place
• Will be hitting the market after two vacant units are filled
• Projected year 1 returns assuming a 50% equity position and 9% effective tax rate:
  • Pre-tax Cashflow $13,108 (5.35%), After-tax Cashflow $12,975 (5.30%), After-tax + Pay Down $21,342 (8.71%), and Total Return (After-tax + Pay down + Appreciation-3%) $42,342 (17.28%)
• These are the highest returns between all properties in these analysis

Duplex - 2 Unit Multifamily in Milwaukie

• $450,000 strike price with 65% Loan-to-value (Approx. ~$166,500 cash to close)
• Current rents are $1425 and $950 so present upside potential with existing long-term tenants
• Been on the market a long time because its overpriced (list was $535,000, now $495,000)
• A fairly turn-key property and i have a list of capital improvements including furnace, roof, paint and fencing
• Projected returns once rents reach full market:
  • Pre-tax Cashflow $6,107 (3.88%), Pre-tax + Pay Down $11,720 (7.44%), After-tax + Pay Down $11,745 (7.46%) and Total Return $24,855 (15.79%)

4 unit Multifamily in Clackamas

• Strike price of $750,000 with 70% Loan-to-value requires approximately ~$234,000 cash to close
• Current scheduled monthly rents are $1,388/per unit
• Lots of updates and capital expenditures done, not the greatest location 
• Projected year 1 returns (before achieving full-market):
  • Pre-tax Cashflow $11,489 (5.11%), Pre-tax + Pay Down $21,565 (9.58%), After-tax + Pay Down $21,424 (9.52%) and Total Return $45,291 (20.13%)

In high entry barrier markets like Portland, I am finding the small 2-4 unit multifamily properties that hit the market to be mostly priced out. Hopefully this is not the case for for your NY market which you appear to be familiar with. 

What is your current rate? When was the loan originated? When looking at the returns for a low down option like this, its hard use percentage returns. Yes, $936 on an invested equated of $30,200 is great as a percentage, but in reality running SO close to the sun. From a buy/hold perspective, we need to look at your After-tax and Principle Pay Down as a return and quantify the capital/equity growth, since cashflow really isn't the play. 

@Joselyn Malik

Yes, but with little or no experience that could be difficult. Generally transaction coordinators are well versed in the forms required to do the job. But that doesn’t mean there are not other opportunities depending on your background. General clerical/office work i am not totally sure as I am an independent broker, but i am sure some residential teams have non-licensed work to be done. I would call some of the larger offices in the area and ask just that. Let me know you’re getting your license, want to be surrounded by their companies culture and real estate and see if they have any positions. Doesn’t hurt to call.

@Joselyn Malik You can take the entire real estate coursework online through pro schools OR Online Ed. I used pro schools. Once you have finished the course works hours and practice exams, you can sign up to take the test at a registered testing center.

Okay I want a 50% CoC in Portland, OR. Find me that or I walk...

What’s backwards is misleading clients with unrealistic goals. 
need to differentiate goals from pipe dreams. 

12% CoC in my market is damn near impossible to find, even in the small apartment world of $1-10 million. Although my market sees pretty considerable appreciation, i think just defining a goal on CoC is a little limiting.

I suppose depending on your goals and time horizons if cash flow is your play then great. But if you’re a high earner, looking for tax protection, high cash flow would be less important than capital/equity growth. No reason for 6.5% rate though.... seeing residential loans around 4% and commercial loans even lower (big depends mark here though). 

On the other end of the coin - anything that is positive leverage perhaps meets your goals for growth (assuming here). Any CoC that exceeds the cost of financing you're effectively making money on borrowed money, and that's even before any principle pay down or appreciation.

In my experience, if you're getting a 12% CoC your in a flatline market, and at the end of the day your total return (after-tax + principle pay down + appreciation-X%) ends up being near the same.

It sounds like you have goals - and that’s cash flow, if the market doesn’t present opportunities for that goal, then move to another and/or stay persistent. 

But to answer your original post, if someone came to me in Oregon and said i need a 12% CoC, that would be pretty limiting to some tertiary southern/coastal areas.

Good luck! 

Hi Carlos,

Looks like you have the right idea for the Portland area. Pretty high entry barrier so with some sweat equity and digging for that needle in the haystack, there is opportunity to really force some appreciation in this Portland area market. My analysis shows that from a "house hack" perspective, the most strait forward way to lessen your monthly out of pocket is in a SFH situation - but as an investment it would not out perform a duplex scenario. So between those two scenario's, i would really say it just depends on your goals. If your goals are growth, the duplex route seems to pencil. Although picking a strategy also depends on your goals, time horizons, capital, and skill set. Pretty different situation for someone with $80k to start and not afraid to swing a hammer, than someone with $15k and little-no handyman skills.

@Joselyn Malik @Grant Schroeder has you covered!