All Forum Posts by: Dallon Schultz

@Jason Graves first I want to applaud you for taking the initiative you teach your daughter invaluable lessons that she will NEVER learn in school at this age. What you're teaching her could easily make her more successful than any college degree. I see this was posted a couple months back. Any progress on getting the wife on board? How does your daughter feel about it? Is she more excited and driven to participate in the property than other extracurricular activities? If she's not too stressed and falling behind in other areas what is your wife's real concern? Does she feel that your daughter should be spending her time on other things or hobbies at this age? Everything is easier when both parents are on board but sometimes you may just have to push through the resistance and allow time to show how beneficial your's and your daughter's decision was.

@Daniel Lozowy great question! I'm sure you'll be able to pick up plenty of little nuggets in this thread and looks like there's already been some great suggestions. I'll share a couple things we've experienced or have looked into when evaluating a potential deal.

1) Are the owners out of state? A simple search on the county assessors page will provide you an ownership entity. Look up the entity and determine if the owner is out of state. History has shown out of state owners don't always maintain them as well as those who are actively involved and in state.

2) Does it look like there are any quick drywall patches in the bathroom or kitchen around water sources? Could be a sign of a potential leak. Was it repaired properly?

3) If there is any type of wood porches, railings, stairs what does the condition of the wood look like? Did they properly maintain it by sealing and/or staining it? Does it look dry rotted? 

4) We always perform a drive thru or google street view to observe the exterior buildings and grounds. If an owner doesn't maintain the visible portions of the property well then I personally am concerned about the conditions of the interiors that aren't visible to everyone passing by.

5) Are water and utility bills higher than usual for that area? Compare to neighboring properties. Could be water leaks or a lot of inefficiencies leading to higher expenses that could easily be reversed.

Hope that helps! Just a couple things we consider when viewing properties.

@Brian Geiger sounds like all the previous posts covered your questions. A little nugget I gained from a fund and syndication symposium that is often overlooked. This one word can earn the GP thousands more if they perform. You'll often hear offerings presented as an "8% pref AND 70/30 split." If you were to word it "8% pref OR 70/30 split, whichever is greater." Changing the "and" to "or" could significantly change the upside on a deal for the GP if they perform. Just something to consider in regards to talking about equity splits.

@Matthew Allen we reside in SE Mesa but network with individuals all over the valley. We recently exited a small MF and are looking to expand our portfolio. Value add is saturated so we've recently changed gears and are looking more into development. My business partner is a licensed contractor in AZ so development is not something that scares us. I don't know if we'd be able to help each other out but I feel it's at least worth an initial phone or zoom call to hear about each others goals. I look forward to hearing from you.

@Dustin Garrels although using the T12 and current rent roll will help you determine the projected value of the property, with how competetive the MF space has come there may not be as much leverage using the current financials to negotiate a lower price unfortunately. There is always someone that will value the deal differently based on their business plan or model. If there is significant value add, then someone may be willing to pay more than what the current value is, based on the existing NOI, because they're focused on the whole project and the exit rather than just focusing on the purchase. I'm uncertain exactly what you're asking in the second part of your question but it sounds like you may be including Capex with your expenses. From personal experience, I would discourage anyone using cashflow to fund their Capex. Raise this money or have it up front. That way you maximize your cash flow and increase your equity exponentially faster.

For those that are actively investing in low income housing, what are some pros and cons you have experienced in doing so? Do you buy existing properties or develop?

@Laura Heckenberg many smaller units are self managed so their expenses will not show a management fee. For smaller properties I would analyze them with a higher management fee. We have a property in rural AZ that we pay 10% on but the numbers still worked and made sense. Took a load of our plate not having to manage it and allowed us to focus on other areas of our investing career.

@Alberto M. that was information I’ve received from commercial lenders, appraisers and brokers in the Phoenix market. As Kevin mentioned its a rule of thumb. Different markets and different asset types even within multifamily may require a more aggressive or conservative approach. My recommendation is if you want to obtain a more accurate number contact those in the area you’re investing in and inquire what’s most appropriate for that market.

Looking forward to connecting with everyone in person tonight at Rudy's! Introduce your friends to our educational based meet up!

@Tanner Litchfield if he doesn't want to be actively involved in investing then maybe he should continue getting his 18% and equity from what it sounds like, in a pretty passive way. That sounds like a sweet deal to me. Sounds like he's a numbers guy so if you are trying to convert his portfolio, present a value-add play that exceeds that 18%. Does the 10% take into account forced and natural appreciation? Is there an exit plan for the property or would he buy and hold? Another aspect of MFH that many people fail to take into consideration is the depreciation and tax benefits involved. What would his return look like if he paid little to no income tax year after year? Just something to consider.