All Forum Posts by: David Alvarado

Sorry I missed this. We shied away from it after numerous attempts to get a hold of the association and doing some more intel on the area. The effort to risk to reward made it not worth it for the size of community. The community we were looking at was over 200 units and there were issues with backed utilities that really cut in to the deal. Still keeping an eye out for other developments, but limiting the size a bit to make things a little less complicated. 

Are you focusing solely in North Carolina for this strategy? And what has been your strategy for closing on the units and financing? Are they purchased all at once or are you staggering?

Cap rate and cash-on-cash (COC) are two very different things. Cap rate is based on market trends and the NOI taking out the financing variables, while your COC is based on the operations of the property along with the financing terms you are able to achieve. 

Figure out a value of the asset based on the following: the $7,200 of gross rents is monthly? If so, you're looking at $86,400 per year in gross potential income. From there you'll want to add whatever other income you might have from laundry, storage, etc, and then you'll want to back out all your expenses - vacancy, bad debt, taxes, insurance, utilities, prop management, professional fees, general and administrative, advertising, etc. As others have mentioned a reasonable purchase price is based on the market trends - comps and cap rates for similarly sized product in your market. Last I saw for primary/secondary markets you can expect a cap rate sub 8% - again this will be highly dependent on what is actually happening in your market so do some DD here. So, take your effective gross income minus your expenses to get your NOI - use a T12 here. Then use the market cap rate for similar product and you'll reach a potential value. You can even use a cap rate range; like 7% - 7.5% to see where that puts you. Compare this number to comps on a per unit basis to see if anything looks funky - higher rents versus comparables will give you a higher per unit cost so be sure to double check. 

Next, run some analysis based on your newly found estimated value and some financing assumptions - you can use the Bigger Pockets calculator for this or run your own model. See what numbers make sense and you'll reach a reasonable offer. Hope that helps.

I think those terms look great! I'm assuming this is a recourse loan?

Just as Patsy said, check what the rate adjust to and make sure there is a ceiling. Also, run your projected numbers in year 5 at the estimated rate to make sure you are still happy with the cash flow you will be seeing.

Welcome Ton! There are quite a few Baltimore based professionals on BP that can help you build a team and invest. Be sure to check out the local based forums. Best of luck!

In discussions I've had in my area - DC Metro - I've been told it can run anywhere from $25K - $50K. For a first deal the lawyer will typically charge a bit more since there will be more "hand holding" through the process and a lot of back and forth. Also, costs can be determined by how complicated the deal is and how many investors there are. 

For your second question, I'd run the numbers at different assumed fee's to see what cost basis makes sense. Work the fee's in to your numbers and this may make you a little more conservative on the front end but it will also make you a little more selective on what deals truly make sense to pursue.

You can find multifamily properties worth a closer look in the Baltimore City area, but everyone's idea of a "good" deal is different. Your investment criteria in terms of returns and the type of product you'd like to own will limit your search. There are quite a few 2+ unit properties in the city listed right now. If you are looking for 10+ unit properties there isn't a whole lot unless you start going the direct mail route. The northwest portion of the city has quite a few of these properties, however only a couple are active on market right now. A little more information on what you are looking for might help - size, age, quality, unit mix, returns you seek, cost per unit basis, etc. 

Thanks for the input. I know the condo docs and getting control of the association will play a big role in the success of the plan. Once that is under control I think the development will be easier to turn around and the units could experience some appreciation thru proper condo association management at which point owners that don't sell could demand more, so a bit of a catch 22 there. 

In terms of upside with my as-is acquisiton assumptions, capex plan, and contingency, returns in the 100%+ should be achieved - working with a 3 year timeline before full upside is achieved. Just looking for a more experienced investor in this specific area to chat with and bounce around ideas on strategy. 

Hi BP, I'm looking to connect with multifamily investors familiar with condo to apartment conversions. Would like to bounce around some ideas on a complex that I believe has significant upside through the conversion and discuss potential tax credit programs that I think can be used in favor to make the deal more profitable. I remember listening to one of the podcast discussing this idea but can not for the life of me remember who was being interviewed. Any guidance is much appreciated! -David

Check the BP marketplace and also consider joining the BWI Meetup group - go to meetup.com and search there. They have meetings and also share properties via an email list. Some is legitimately off market, while others are not.

Welcome Kiarra!