All Forum Posts by: Dallon Schultz

@Bryce DeHaan do your best to have a good idea of how much capital your investors truly have to invest. You stated that you're new, when it comes time to pull the trigger on purchasing a property will your investors follow through or get cold feet? I pose those questions so you can be realistic in identifying and analyzing properties. Wouldn't make sense to be looking at 20 unit properties when 4 units may be more appropriate. Just some things to consider!

As far as broker pro forma's, never rely solely on them. Once you identify the market you want to invest in, call property managers or owners of similar size properties and establish what the average or "norm" is. Use this newly collected data and compare it to OM you get. The county assessors page also provides a lot of useful public information in regards to taxes, zoning, owners, etc.

If you are brining in outside capital to purchase these deals then you will have a fiduciary responsibility to ensure your underwriting is as solid as possible. Start building your team of experienced brokers, lenders, property managers, attorneys, cpa's, potential partners etc.

Good luck!

@Stephen Pettitt welcome and way to take charge and make the decision to begin taking action. Being new to the arena you've probably already realized there are many different avenues to take when getting involved in real estate investing. My team and I focus on multifamily in the Phoenix area and also host a free monthly meetup educating others on the multifamily space. We've worked hard to build a high energy environment where both new and experienced investors can come together to network, learn and become empowered. If multifamily is an area of interest for you I'd be happy to jump on a call and answer any questions you may have. 

I look forward to connecting further with you,

Dallon

@Curtis Bonsignore I'd say biggest value I've found was to connect with other like minded individuals. If I have a question I can typically find others dealing with similar situations or have experience and are more than happy to share their thoughts. 

It's also provided an avenue for me to provide value by answering questions, motivating or inspiring others that are looking to take their real estate to the next level.

It's provided me opportunities to meet locals in the Phoenix area that are also interested in real estate and opened up the potential for face to face meetings.

With that being said, what would make BP valuable to you? What would you like to see come from your activity on here?

@Todd Dexheimer you’re right. Selling wasn’t part of the plan but we took advantage of it to scale up to larger properties. Due to our efforts we increased the Cashflow by $300/door/month so we definitely had a strong cash flow play. It’s always good to set yourself up for multiple exit strategies as well. Fortunately we had the option to hold or sell but decided to take advantage of the strong market and sold. Now onto larger properties!

@Rylan Lacey currently under contract in Phoenix area for some land with plans to develop additional multifamily. Would like to connect further with others that are active in the space. Thanks for sharing your thoughts and insights.

@Wave Taylor our first couple purchases were c class 4plexes. One we bought for $60k a door and sold for $108k/door 18 months later after some renovations and successful management. There's opportunities in almost every area of real estate. Once you determine what asset type and class you want to begin investing in, find others that are successful in that space and connect with them!

@Erik B. well it sounds like you're taking the right approach! I wish I had a simple answer for you but even in the world of commercial multifamily everything will vary from building type to building type. For examples, the fire sprinkler requirement you mentioned I believe is only for buildings that are 4 stories or higher. I'd imagine that is part of the reason why I keep seeing large Class A developments that are going in that are 3 stories max. You mentioned a 6 unit in your initial post, is that what you're looking at? The best suggestion I could make is to narrow down your criteria and do the research required for that particular building style, size and market. 

@Account Closed it's possible. We purchased our first 8 units without any of our own money. We utilized a combination of seller financing and private capital to take it down. We brought value to the deal because of our hustle. We found the deal, analyzed the deal, negotiated the terms so by the time we approached investors we were able to show them the offering. We worked our tails off and didn't make our money until we sold. What are some of your strengths that you could leverage to put a deal together instead of bringing the cash in? Just some things to think about.

@Tom Dittrich this has been an area of interest for me as well for quite some time. I've had some excellent calls with some SEC attorneys to help provide further direction. One thing I did not consider that was shared with me is that when setting up a fund of funds you essentially become a financial advisor for your clients so not only do you need to abide by SEC law you'll need to abide by the financially advising laws particular to the state you are setting the fund up in.

There are a lot of different ways to structure your fees, just remember that you have a fiduciary responsibility to your clients. I would be willing to take less up front, especially if it was my first fund, to ensure a pleasant experience for my investors so they become investors for life. Start with the end in mind. With that being said I've heard of some fund managers negotiating higher prefs or different splits with operators due to the large sum of money you'll be brining into their deals. If they're offering an 8% pref for each investor that puts in $50k and you want to put in $1M, why not negotiate a 10% pref. You could help fully subscribe their deal within a day or two which would bring a significant value.

A lot of good thoughts. There's a good book called "Raising Capital for Real Estate" by Hunter Thompson. Might be worth a read.

Happy investing!

@Erik B. great questions. Hopefully I can provide some insight or answers to your questions.

-Lending issues/requirements

You're probably already familiar with the lending but 1-4 units is residential, 5+ commercial. When dealing with smaller multifamily though you may more frequently find mom and pop owners that would be open to seller financing. 

-Tax Responsibility

As far as tax responsibilities I'd advise talking to a CPA to get more detailed info. Obviously the more doors you own the more you can depreciate the asset and save more on taxes. If you qualify as a real estate professional that will allow you to take the most advantage of your losses. As far as property taxes, that vary's state by state. In a lot of states the sale of a property triggers a reassessment which can greatly increase your annual tax expense. Especially if it's a property that's been under the same ownership for 15+ years. I live in Arizona and in 2015 a proposition was passed that the Limited property value can not increase more than 5% a year. This includes the sale of a property. From my understanding the only thing that would trigger a reassessment is major additions or development to the existing structure or a zoning change. This has kept property taxes increasing around 3% per year. 

-Code Requirements

This will vary from state to state and municipality. Wherever you're looking to buy, go to the City and/or county page and contact the planning and zoning supervisor. 

-Insurance Rates and Coverage

There are a lot of variables that go into rates and coverage on these types of assets. The best way to gather this info is to get in contact with an insurance broker that focus specifically on commercial and multifamily. 

-Value or Appraisal Process

Any building 4 units and less will be heavily appraised based on comps. 5+ structures weigh more heavily on the income approach (Value=NOI/Cap Rate) but also incorporate comps in the area

The beautiful thing about all the questions you posed is that there are professionals in each one of those areas that can assist you further without having to expend all your time and energy trying to figure it all out on your own. Sounds like it's time to start putting your team together!